Bitcoin’s basis trade could see a surge if the Federal Reserve lowers interest rates.

Bitcoin
BTC
$110,674.25

Bitcoin’s basis trade, which profits from the difference between spot and futures prices, has been muted throughout 2025—but a potential Federal Reserve rate cut on Sept. 17 could reignite interest.

CME FedWatch data shows roughly a 90% chance the Fed will lower the federal funds target by 25 basis points from its current 4.25%-4.50% range. Analysts say easier monetary policy could drive leverage demand, lifting futures premiums and reviving the basis trade after a year of subdued activity.

The strategy involves taking opposing positions in spot and futures markets—buying in one while selling in the other—to capture the narrowing spread near expiry, while minimizing exposure to BTC’s price swings.

With rates still above 4%, the annualized return on the basis trade—around 8%—has been less attractive. Lower rates are expected to incentivize investors to re-enter the trade instead of holding cash.

CME bitcoin futures open interest has fallen from over 212,000 BTC at the start of the year to around 130,000 BTC, according to Glassnode, roughly the same as during the launch of spot BTC ETFs in January 2024. Annualized basis returns have stayed below 10% in 2025, compared with 20% at the end of last year, reflecting tighter funding, slowing ETF inflows, and reduced risk appetite.

Bitcoin’s compressed trading range has also restrained futures premiums, with implied volatility near 40—just above last week’s record low of 35.

If the Fed cuts rates, liquidity could improve, supporting risk assets and potentially boosting CME futures open interest. This could restore the basis trade’s appeal and mark a return of institutional activity in BTC markets.

About The Author

ctleditor

See author's posts