Basis Trade
A trading strategy that seeks to profit from the price gap between a crypto asset’s spot price and its futures or perpetual contract price.
A basis trade is a market-neutral strategy built around the “basis,” or difference between the spot price of a crypto asset and the price of a related derivative such as a futures or perpetual contract. In crypto, the most common version is a cash-and-carry trade: a trader buys the asset in the spot market and sells a futures contract when the futures price is higher. The goal is to capture the gap as the futures price moves toward the spot price by expiry, or to earn funding payments in perpetual markets.
For example, if bitcoin trades at $60,000 on spot exchanges while a futures contract trades at $61,000, a trader might buy bitcoin and short the futures contract, aiming to lock in the $1,000 difference before fees and borrowing costs. Basis trades matter because they help connect spot and derivatives markets and can reveal demand for leverage. They are often described as lower-directional-risk, but they still carry risks such as liquidation, exchange failure, funding rate changes, slippage, and imperfect hedging.
Other terms in Crypto Trading
Funding Rate
A periodic payment between perpetual futures traders that helps keep the contract price close to the spot market price.
Leverage Trading
Leverage trading is using borrowed funds to open a larger crypto position than your own capital would normally allow.
Limit Order
An order to buy or sell a cryptocurrency only at a specified price or better.
Long Position
A trade that aims to profit when a crypto asset’s price rises.