Futures Basis
The futures basis is the difference between a futures contract's price and the current spot price of the same asset. A positive basis means futures trade above spot, a negative one means they trade below.
Why futures and spot differ
A futures contract is an agreement to buy or sell an asset at a set price on a future date. Its price usually differs from spot because holding the asset until then has costs and benefits, and because traders may be willing to pay extra for leveraged exposure without buying the coin.
When futures trade above spot, the market is in contango. When they trade below, it is in backwardation. As the expiry date approaches, the futures price converges with spot, so the basis shrinks towards zero at settlement.
Measuring it
Basis is often shown in dollars, as a percentage, or annualized so that contracts with different expiries can be compared. Say BTC spot is 50,000 dollars and a futures contract expiring in three months trades at 51,000. The basis is 1,000 dollars, or 2 percent. Over three months, that is roughly 8 percent per year, before fees and compounding.
For perpetual futures, which never expire, the gap to spot is kept small through funding payments instead, so analysts look at the funding rate as the perpetual equivalent of basis.
What it can signal
A high positive basis often reflects strong demand for leveraged long exposure and is sometimes read as a sign of bullish, crowded positioning. A negative basis can mean heavy hedging or bearish sentiment, or stress in the market. These are clues about positioning, not forecasts, and basis can stay high or low for long periods.
Why traders care
Basis is the core of the basis trade: buy spot and sell the more expensive future to lock in the gap. It also matters for anyone rolling futures positions, because a large contango makes staying long through futures more expensive than simply holding the asset. Different exchanges can show different basis for the same coin, which reflects their particular traders and liquidity.
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Frequently asked questions
What is contango?
Contango is when futures trade above the spot price, giving a positive basis. It is the more common state in crypto futures markets.
What is backwardation?
Backwardation is when futures trade below spot, a negative basis. In crypto it often appears during sharp sell-offs or heavy hedging.
Does basis predict price moves?
No. It shows how traders are positioned and what they pay for exposure, which can add context, but it does not tell you where the price will go.
Related terms
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