Spot Futures Basis

Definition ∞ Spot futures basis represents the price difference between a cryptocurrency’s immediate spot market price and its price in a corresponding futures contract. A positive basis, or contango, indicates futures prices are higher than spot prices, while a negative basis, or backwardation, shows futures prices are lower. This metric is a key indicator of market sentiment and expectations for future price movements. It influences arbitrage opportunities and trading strategies.
Context ∞ Crypto news frequently analyzes the spot futures basis to gauge market sentiment and predict potential funding rate changes in perpetual futures contracts. A widening basis often suggests strong bullish sentiment, while a narrowing or negative basis can signal bearish trends. Traders monitor this basis for opportunities in market-neutral strategies and to assess hedging costs.