Basis

Basis is the spread between a futures or perpetual contract and its underlying spot price, usually expressed in price or percentage terms. A positive basis (contango) signals net demand to be long with leverage and a cost of carry; a negative basis (backwardation) signals the opposite. For dated futures the basis must converge to zero at expiry, which underpins cash-and-carry arbitrage; for perpetuals there is no expiry, so the funding rate continuously does the converging work. A rapidly widening basis is a sign of leverage and speculative demand building, while a collapsing or negative basis often accompanies forced de-risking.

In plain English — Basis is the difference between a derivative’s price and the spot price of the same asset. When futures trade above spot the basis is positive (the market is in "contango"); when below, it is negative ("backwardation"). For perpetuals, basis and funding are two views of the same pressure — a stretched basis tends to coincide with strong funding pushing the contract back toward spot. Basis reflects demand for leverage and the cost of carrying a position.

Spot BTC is $60,000 while the quarterly future trades at $61,500 — a +$1,500 (2.5%) basis. A trader could in theory buy spot and sell the future to capture that gap by expiry (a "cash-and-carry"), accepting the operational and counterparty risks of doing so.