Basis

Basis is the difference between a futures (or perpetual) contract price and the spot index price: basis = futures - spot. Expressed as a percentage: basis% = (futures - spot) / spot x 100.

A positive basis means the futures price trades above spot — called contango — and usually signals bullish sentiment or high demand for leverage. Longs in this environment typically pay a positive funding rate to compensate shorts. A negative basis (futures below spot) is backwardation, common during sharp deleveraging events when sellers flood the perp market.

Example. BTC spot is $100,000 and the perp trades at $100,400. Basis = +$400, or +0.40%. If funding resets every 8 hours and the exchange uses a 1:1 funding-to-basis link, the 8-hour rate is roughly +0.40%, which annualizes to about +438% (0.40% x 3 x 365).

Basis is a key input for cash-and-carry arbitrage: buy spot, short the futures, and capture the positive basis as it converges to zero at settlement or through funding payments on a perp. Research output only — this is not investment advice.