Crypto Basis Arbitrage
Goes long spot against short perp when annualized funding exceeds 18%. Pairs are delta-neutral; primary risk is exchange/counterparty and execution slippage during stress events. Exits when funding flips negative or the basis compresses below 4%.
Crypto Basis Arbitrage is a medium-risk crypto strategy. Goes long spot against short perp when annualized funding exceeds 18%. Pairs are delta-neutral; primary risk is exchange/counterparty and execution slippage during stress events. Exits when funding flips negative or the basis compresses below 4%.
The core idea: capture funding-rate basis between spot and perpetual futures on major venues. The system looks for setups that meet every entry condition simultaneously, then manages the position mechanically according to the exit rules — no discretion, no "gut feel" overrides.
Historically, this strategy has won 92% of its 689 trades over the 2021-06 to 2025-03 period, returning 9.7% annualized with a Sharpe ratio of 2.41. The worst peak-to-trough drawdown was −2.8%.
Risk profile: each trade risks at most 1.0% of equity, with a hard stop at −2.0% and a profit target at +12.0%. The system caps exposure at 6 concurrent positions. Position sizing is rule-based: up to 20% of equity per pair; spread across 3 venues minimum.
What can go wrong: every strategy has a regime where it underperforms. Crypto Basis Arbitrage is no exception — drawdowns of 2.8% (and sometimes worse) are part of the distribution of outcomes. Past performance does not predict future returns; the edge may erode as markets change. This page exists to teach the mechanics, not to promise results.
- Annualized funding rate > 18% on the perp.
- Spot-perp basis within 0.10% (executable).
- Venue is Tier-1 with > $1B daily ADV.
- Funding rate < 4% annualized.
- Basis widens > 0.5% (de-risk).
- 30-day maximum hold reached.
Up to 20% of equity per pair; spread across 3 venues minimum.
2021-06 to 2025-03
Based on 689 historical trades.