Basis Trade
Buy spot + sell futures = earn the premium with no directional risk.
Basis trade exploits the fact that futures often trade above spot (contango). Buy BTC spot at 70k, simultaneously short March BTC futures at 73k = earn 4.3% regardless of price (they converge at expiry). At scale: BlackRock + Fidelity ETFs run multi-billion basis trades.
In plain words
You buy BTC for cash and simultaneously sell the promise of BTC in 3 months at a higher price. Whether price rises or falls you make the difference.
Example
March 2024: BTC spot 67k, CME March futures 71k = 6% basis/3 months = 24%/year. BlackRock ETFs put 8B USD in basis trade.
Also known as: cash and carry