Basis Trading in Crypto Part 1: Time Value of Money and Calculating Basis

The Time Value of MoneyBefore diving into basis trading in crypto, it is necessary to understand the time value of money. The Future Value of MoneyJack borrows $100 USD from the bank for one year, at an interest rate of 10%. Basis (B) = Future Price (F) – Spot Price (S)The above formula expresses Basis as a nominal value. Basis trading is all about comparing futures contracts with different maturities. When evaluating the cost of crypto futures contracts, calculate the annualised basis, and then compare.