This metric compares the annualized rates of return available in a cash-and-carry trade between 3-month expiring futures (3-mth rolling basis), and perpetual funding rates. Given digital assets have low storage, handling and delivery cost overheads (unlike physical commodities), perpetual futures have become a preferred instrument for market speculation, risk hedging, and capturing funding rate premiums.

From this study, we can draw the following conclusions:

• Perpetual futures basis is significantly more volatile than that of expiring futures, which is a result of the demand for leverage in an instrument (perpetual futures) that more closely tracks spot market price indexes.

• Periods where perpetual basis trades lower than 3M basis have historically occurred after a downside price action and de-risking, such as during bull market corrections, or during more prolonged bearish trends.

• Conversely, periods where the perpetual basis is significantly higher than 3M basis signal that there is a high demand for leverage in perpetual markets, which in turn creates an oversupply of sell-side contracts, as traders act to arbitrage down the high funding rates.

This metric was first featured by Glassnode in The Week On-chain (Week 12, 2022)