Basis is the difference between comparable futures and spot prices. Here we always calculate futures minus spot. For bitcoin contracts, currency, price reference and time to maturity must also be stated; otherwise the figures cannot be reliably compared.
Basis denotes a price difference between futures and spot. This entry uses B = F - S: futures price minus spot price. The convention is not universal; CME's grain example instead calculates cash price minus futures. Without the formula, the same label of positive basis can describe the opposite situation. The grain example demonstrates different conventions, not bitcoin market behavior. [1]
Record the time of both prices, currency, spot source, specific futures contract and maturity. CME distinguishes bitcoin contracts with different references and currencies. Last trade price, bid–ask midpoint and settlement reference are not interchangeable. A difference between nonsimultaneous or differently defined prices may create an apparent basis that cannot be traded at those values. [3]
Under the convention chosen here, positive basis means futures above spot and negative basis futures below spot. CME calls the corresponding relationships Contango and Backwardation. However, a curve of several maturities requires several prices; a single figure does not describe its entire shape. The price relationship alone guarantees neither the future direction of spot nor a particular trade's success. [2]
The price difference has the same unit as the price quotations. Dividing by spot gives relative basis; annualization additionally requires time to maturity and an explicit time convention. Crypto Carry studies the annualized futures–spot difference. That conversion is neither net return on equity, compound interest nor a promise that the same conditions can be repeated throughout a year. [4]
Standard USD Bitcoin Futures at CME settle in cash to the corresponding CME CF Bitcoin Reference Rate. This does not mean the last quote on every spot exchange must be identical at the same instant. When assessing convergence, distinguish the futures contract, its settlement reference and the price at which you actually sell or buy your own BTC. [3]
Basis is a measured difference, whereas Basis Trade is a trading combination. For equal-sized linear long spot and short futures exposures, the combined change in value before costs equals the BTC quantity multiplied by the difference between initial and final basis, provided the same comparable prices are used throughout. Widening basis can therefore hurt the combination before maturity. BIS describes this strategy's risks, including liquidations during adverse developments. [4]
Observed basis alone does not include all financing costs, fees or the execution price of both trade legs. CME notes that margin requirements may change. A short futures account may need additional funds even while BTC value rises in a separate spot account. The final price difference does not address cash availability during the holding period. [5]
Rolling means closing the existing futures contract and opening a different maturity, as CME describes for Micro Bitcoin Futures. The new contract has its own price, remaining term and transition costs. Label a basis time series with the contract identifier and rollover rule. A jump when replacing the contract must not appear without explanation as a move in the same basis. [6]
One convention across three price snapshots
For the clearest picture, read this entry together with Bitcoin basis trade, Hedging, Contango, Backwardation, Bitcoin futures.
01Does positive basis always mean futures above spot?+
Only under the futures-minus-spot convention used here. Reversing the subtraction gives the same prices the opposite sign. First check the source's definition.
02Is annualized basis an expected net annual return?+
No. It is a time conversion of a price difference under stated assumptions. It does not automatically include costs, required capital, margin risk or the ability to repeat a trade on the same terms.