Crypto glossary
Basis trade (cash-and-carry)
A basis trade, or cash-and-carry, buys an asset spot and sells its futures at a premium, locking in the price gap as profit when the contracts converge.
Futures usually trade above spot in crypto because traders pay up for leveraged long exposure. That gap is the basis. In a basis trade, an investor buys bitcoin or a spot ETF and simultaneously sells futures of the same size. At expiry, futures and spot prices converge, so the investor captures the initial premium regardless of where bitcoin ends up. With perpetual futures, the equivalent return comes from collecting funding payments.
The trade is a staple of hedge funds and trading desks. After US spot bitcoin ETFs launched in 2024, many funds bought ETF shares and shorted CME futures, and swings in that trade help explain large ETF inflows and outflows that are not directional bets. Annualised basis is also a widely watched gauge of leverage demand.
Returns shrink when markets cool and the basis compresses. The position ties up margin, and a sudden rally can trigger margin calls on the short leg even though the overall trade is hedged. Counterparty, exchange and execution risks remain.
Example
With bitcoin at 100,000 dollars and three-month CME futures at 102,000, a fund buys ETF shares and shorts the futures, locking in about 2% for the quarter, roughly 8% annualised before costs.