What Is “Basis Trading” in the Context of Crypto Futures?

Basis trading is an arbitrage strategy that exploits the difference (the "basis") between the price of a perpetual or traditional futures contract and the price of the underlying asset in the spot market. A trader simultaneously takes a long position in the spot market and a short position in the futures market (or vice versa).

The profit is locked in by the difference in the two prices, less the funding rate or cost of carry. It is a market-neutral strategy that relies on the price convergence of the two assets.