Basis Trade
A basis trade (or cash-and-carry trade) is a delta-neutral strategy that captures the spread between a futures contract price and the underlying spot price. The trader buys the spot asset and simultaneously shorts the futures contract, locking in the difference (the basis) at settlement. In crypto, basis trades using CME Bitcoin futures and spot BTC ETFs became a major institutional strategy in 2024-2025, with the basis fluctuating based on market sentiment, ETF flows, and leverage demand. The funding rate on perpetual swaps is closely related — a positive funding rate creates a basis-like return for traders who short the perpetual while holding spot. Basis trade profitability depends on the cost of capital (borrowing rates for spot or stablecoins), execution costs, and the expected convergence of futures to spot at expiry. Large-scale basis trading by institutions has been a significant driver of crypto market structure maturation and ETF flow dynamics.