>The basis trade, classically executed, is delta neutral: one isn’t exposed to the underlying itself. You don’t need any belief in Bitcoin’s future adoption story, fundamentals, market sentiment, halvings, none of that. You’re getting paid to provide the gambling environment, including a really important feature: the perp price needs to stay reasonably close to the spot price, close enough to continue attracting people who want to gamble. You are also renting access to your capital for leverage.

Patrick is largely correct on perp futures being mostly used as a leverage instrument to gamble on bitcoin or ether by retail. However I think he's missing one point which is that actually some institutional players also use CME futures to gain exposure to Bitcoin (e.g., BITO ETF or a pension fund that wants to gain exposure to crypto and have a fiduciary duty to hold assets with AAA custodians).

The thesis being that if you're an institution, you don't trust the relatively "fly-by" offshore crypto or even US-regulated custodians of crypto. When you trade CME bitcoin futures, your settlement is guaranteed by the clearing entities of Chicago Mercantile Exchange which are bulge bracket firms of TradFi. So why CME futures largely reflect a premium over the spot BTC price - and this premium is a function of the demand of bitcoin at anytime and the Fed fund rate. As the bitcoin futures market is highly efficient, the CME futures premium is arbitraged across the various DeFi and CeFi exchanges with basis points added relative to the default risk of each venue.

And the basis trade itself is not a "risk-free" arbitrage. The seller on the other side of gamblers are exposed to "right-tail" risk - your premium you get paid to "carry" the bitcoin is fixed while the collateral you must hold in theory to "hold" the coin on behalf of the buyer could be in theory infinite if bitcoin skyrockets to infinity. Sell too much and you might not have enough collateral before the futures settlement happens (for a fixed term futures, not perps) kind of like a reverse but still deadly scenario with Silicon Valley Bank (i.e., you incur "paper loss" that goes away if you can hold it to expiry; but you get force liquidated before then).