How Do Arbitrageurs Profit from the Basis in Perpetual Futures Markets?

Arbitrageurs profit from the basis by executing a 'basis trade' or 'cash-and-carry' arbitrage. When the perpetual futures price is significantly higher than the spot price (contango), an arbitrageur will simultaneously buy the asset on the spot market and sell (short) the perpetual future.

They can then collect the positive funding rate payments from long position holders. Their position is market-neutral, as the gains on one leg of the trade offset losses on the other, leaving the funding rate payments as their primary source of profit until the basis narrows.