What it is
A basis trade is a market-neutral strategy where an investor simultaneously buys a spot asset and sells a corresponding futures contract, or vice versa, to profit from the convergence of the two prices. The "basis" refers to the difference between the spot price and the futures price. Traders expect this difference to narrow as the futures contract approaches its expiration date, ideally profiting from the spread.
In crypto markets, basis trades are common, particularly with Bitcoin. For example, a trader might buy spot Bitcoin and sell Bitcoin futures contracts. The profitability of the trade depends on the futures price being at a premium to the spot price, known as "contango." This strategy carries risks, including unexpected price divergence, funding rate volatility on perpetual futures, and the cost of capital, but can offer consistent returns in specific market conditions.
Why it matters
Basis trades allow investors to profit from predictable price differences between spot crypto and futures contracts, but require careful management of leverage and risk.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice