Bitcoin’s near-term outlook may hinge on whether the Federal Reserve eases policy at its Sept. 17 meeting — and that decision could determine if the dormant basis trade comes back to life. The CME FedWatch tool shows roughly a 90% probability of a 25 basis-point cut, and easier rates tend to spur demand for leveraged strategies that push futures premiums higher.
The basis trade is a market play that profits from the gap between the spot price of bitcoin and futures prices: traders buy spot (or hold ETFs) while selling futures, or the opposite, to capture the narrowing spread as contracts approach expiry. It’s a way to earn a return while hedging directional price risk.
Market indicators show the trade has been subdued in 2025. CME futures open interest has fallen from over 212,000 BTC at the start of the year to about 130,000 BTC, according to on-chain data providers. The annualized basis has generally stayed under 10%, a meaningful decline from ~20% late last year. Meanwhile, implied volatility sits near 40 after briefly touching a record low of 35, compressing the opportunity for yield through basis strategies.
Several forces explain the weakness: tighter funding conditions reduced appetite for leverage, ETF inflows cooled after 2024’s surge, and many institutional allocators rotated risk away from bitcoin. Lower volatility and lighter institutional leverage have capped futures premiums and muted basis returns.
What could change — and what to watch
- Fed action: a confirmed easing cycle would likely lower short-term rates and make leveraged trades more attractive.
- Futures open interest: a rising figure would signal renewed institutional participation in derivatives markets.
- Futures premiums (basis): sustained increases would revive the economics of the basis trade.
- Implied volatility: higher volatility can lift premiums but also raises hedging costs—watch both moves.
Risk note: the basis trade uses leverage and derivative exposure; it can amplify losses if bitcoin moves sharply or liquidity conditions change unexpectedly. Investors should weigh funding costs, counterparty risk and ETF flows before attempting this strategy.
Source: CoinDesk. Read the original coverage for full details.