Perp-Spot Basis (%) for crypto assets
"Perpetuals - Spot" basis for crypto assets, expressed in percentage terms.
Can be applied to any crypto asset with perps, to any exchange.
Make sure to adjust exchange rate by USDTUSD if one of the two legs is in USDT and the other in USD.
Basic interpretation: when red (negative) derivatives traders are bearish ; when blue (positive) derivatives traders are bullish .
This basis is at the core of perps funding rates calculations. Generally when the basis is negative funding is negative and when the basis is positive funding is positive. Can think of this basis as a proxy for funding that adjusts faster.
How to use it:
#1 General concept
Ideally only execute longs when red.
Ideally only execute shorts when blue.
#2 Snipper during pull-backs
When in an uptrend and basis blue, ok to buy the dip when it turns red.
When in an downtrend and basis red, ok to sell the rip when it turns blue.
Ideally wait for the basis to pop (higher if uptrend, lower if downtrend) before executing (this happens during stop runs / liquidations).
#3 Intraday execution
When price going down and basis red, perps leading (normal).
When price going down and basis blue, spot leading and perps offside (great for short term shorts, do not long until price dumps and flushes offside longs out).
When price going up and basis blue, perps leading (normal).
When price going up and basis red, spot leading and perps offside (great for short term longs, do not short until price pops and flushes offside shorts out).
#4 Larger time frames
When consistently blue on larger time frames: bull market.
When consistently red on larger time frames: bear market.
Can be applied to any crypto asset with perps, to any exchange.
Make sure to adjust exchange rate by USDTUSD if one of the two legs is in USDT and the other in USD.
Basic interpretation: when red (negative) derivatives traders are bearish ; when blue (positive) derivatives traders are bullish .
This basis is at the core of perps funding rates calculations. Generally when the basis is negative funding is negative and when the basis is positive funding is positive. Can think of this basis as a proxy for funding that adjusts faster.
How to use it:
#1 General concept
Ideally only execute longs when red.
Ideally only execute shorts when blue.
#2 Snipper during pull-backs
When in an uptrend and basis blue, ok to buy the dip when it turns red.
When in an downtrend and basis red, ok to sell the rip when it turns blue.
Ideally wait for the basis to pop (higher if uptrend, lower if downtrend) before executing (this happens during stop runs / liquidations).
#3 Intraday execution
When price going down and basis red, perps leading (normal).
When price going down and basis blue, spot leading and perps offside (great for short term shorts, do not long until price dumps and flushes offside longs out).
When price going up and basis blue, perps leading (normal).
When price going up and basis red, spot leading and perps offside (great for short term longs, do not short until price pops and flushes offside shorts out).
#4 Larger time frames
When consistently blue on larger time frames: bull market.
When consistently red on larger time frames: bear market.