Basis
What is the difference between a futures price and the spot price, and why does it matter?
In plain words
Basis is the gap between the price of a futures contract and the current spot price of the underlying asset, often quoted as a percentage of spot. A positive basis means futures trade above spot, usually reflecting funding costs and expected carry over time.
Why it matters
Basis tells a trader whether the market is paying to hold a position forward in time. A widening positive basis can signal demand for leverage, while a negative basis can signal hedging pressure or forced selling. It also sets the cost of rolling a contract.
In a real week: ETH, week of 25 January 2021
In the week of 25 January 2021, ETH fell from 1392.19 to 1312.55, a return of -5.72%. This data reports funding rather than the futures price directly; funding averaged 0.0659% per eight hours and peaked at 0.2414%. Sustained positive funding is the mirror of a positive basis, so perpetual longs were paying to stay in position during the week's 22.2% range.
A common mistake
Treating funding and basis as the same number. Funding is the periodic payment that reflects the basis; the basis itself is the price gap, which the funding rate only approximates.