Basis Trade vs Exchange Counterparty Risk

A market-neutral derivatives strategy that earns the funding rate premium by simultaneously holding a long spot position and an equivalent short perpetual futures position; the two legs offset each other to create a delta-neutral position that collects funding payments from the short leg.

The risk that an exchange fails or becomes insolvent, rendering derivatives positions — which are contractual claims on the exchange, not direct asset ownership — unrecoverable; the FTX collapse in November 2022 resulted in approximately $8 billion in user funds lost; mitigated by limiting single-exchange exposure to 30% of total capital.