Crypto basis trading involves simultaneously buying a cryptocurrency in the spot market and selling an equivalent amount of a futures contract for the same asset. This strategy seeks to profit from the difference, or “basis,” between the spot price and the futures price. Traders typically aim to capture the premium in the futures contract as it converges with the spot price upon expiry. It is a market-neutral strategy, meaning profits are less dependent on price direction.
Context
Crypto news frequently reports on basis trading as a common strategy employed by institutional investors and quantitative funds seeking consistent returns in volatile markets. The basis can vary significantly due to factors like funding rates, market sentiment, and liquidity. Discussions often center on the risks associated with futures market volatility and the impact of sudden price movements on liquidation thresholds.
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