The basis trade is one of the most popular market-neutral strategies in crypto: go long spot, short perpetual futures, and collect the funding rate. This puzzle walks you through building a real basis trade one decision at a time.
How it works
- Set up the legs — choose the right long/short combination for a positive funding rate.
- Choose position size — size the trade to hit a daily yield target.
- Pick safe leverage — basis trades are carry trades; low leverage is the point.
- Calculate the annual yield — convert the 8-hour funding rate into an APY.
Why this matters
Basis trading captures the difference between spot and perpetual futures prices:
- Positive funding means longs pay shorts. You go long spot and short the perp to collect it.
- Delta neutrality means the Bitcoin price barely matters — you are harvesting yield, not betting on direction.
- Low leverage is key. The spread is small; a liquidation can wipe out weeks of yield.
Tips
- Funding rates change every interval. The APY is the theoretical yield if the current rate stayed flat.
- Don’t forget fees, slippage, and the cost of borrowing to short the perp.
- Compare the funding yield across exchanges to find the best opportunities.
Frequently asked questions
What is a crypto basis trade?
A market-neutral strategy: you buy the spot asset and short the perpetual future on the same instrument. Because the two legs offset each other, price direction barely matters — the yield comes from the funding rate, which longs pay shorts when the rate is positive.
How does the builder estimate annual yield?
It converts the current 8-hour funding rate into an annualized figure. That APY is theoretical — it assumes the rate you see now stays flat, which it rarely does. Treat the output as a sizing exercise, not a forecast.
Why does the puzzle push low leverage?
The funding spread is small, so returns only look attractive with size — but size plus leverage means a liquidation can erase weeks of collected yield in one wick. Check how close your short leg sits to its liquidation price with the liquidation calculator.
Can the yield turn negative?
Yes. Funding flips when perps trade below spot — then shorts pay longs and the carry reverses. Rates reset every funding interval, so the trade has to be monitored, not forgotten.
What costs does the estimate not include?
Trading fees on both legs, slippage, and any borrow cost for the short leg. Compare venues before committing with the funding rate calculator and each exchange’s fee schedule.
This tool is for education and entertainment only — not financial advice.