Basis Trading in Crypto: Capturing the Futures Premium
Basis trading captures the spread between crypto spot and futures prices as low-risk yield. Here is how to execute it correctly.
Basis trading (also called cash-and-carry arbitrage) exploits the fact that quarterly crypto futures consistently trade at a premium to spot price, reflecting the market's bullish sentiment. You capture this premium as yield by simultaneously holding spot and selling the futures — earning the spread as they converge at expiry.
How Basis Trading Works
- Buy 1 BTC at spot ($100,000)
- Simultaneously sell 1 BTC September quarterly futures ($104,000 = 4% premium)
- Hold both positions until futures expiry in September
- At expiry: futures and spot converge — close futures position at spot price
- Profit: $4,000 (the 4% basis) — earned regardless of BTC price direction
Calculating the Annualised Return
- If expiry is 90 days away and basis is 4%: annualised return = 4% × (365/90) = 16.2% APY
- During bull markets, basis can reach 20-30%: annualised yield of 80-120% APY on this trade
- Risk: exchange risk (counterparty on the futures side), funding risk if using perpetuals instead of quarterly
Risks and Mitigation
Basis trading is low-risk directionally but carries exchange counterparty risk. The largest loss scenario: exchange goes bankrupt with your position open. Mitigation: use Steyble Perps (self-custodial derivatives) for the short side, holding spot in your own Steyble wallet. This eliminates exchange counterparty risk — the basis trade exists entirely within your self-custodial infrastructure.