The big question for bitcoin (BTC) is whether the basis trade, an attempt to profit from the difference between the spot price and the futures market, will return if the Federal Reserve cuts interest rates on Sept. 17.

There’s a 90% chance the Federal Open Markets Committee will cut the federal funds target rate by 25 basis points from its current 4.25%-4.50% range, according to the CME FedWatch tool. A shift toward easier policy could spark renewed demand for leverage, pushing futures premiums higher and breathing life back into a trade that has remained subdued throughout 2025.

The basis trade involves buying bitcoin in the spot market or through an exchange-traded fund (ETF) while selling futures (or vice versa) to profit from the price difference. The goal is to capture the spread as it narrows toward expiry, while limiting exposure to bitcoin’s price volatility.

With fed funds still just above 4%, an 8% basis — the annualized return on the basis trade — may not look attractive until rate cuts begin to accelerate. Investors are likely to want lower rates to incentivize them to go into the basis trade rather than just holding cash.

On CME, bitcoin futures open interest has slumped from more than 212,000 BTC at the start of the year to around 130,000 BTC, according to Glassnode data. This is roughly the level seen when spot bitcoin ETFs launched in January 2024.

The annualized basis has stayed below 10% all year, according to Velo data, a striking contrast with the 20% seen toward the end of last year. The weakness reflects both market and macro forces: tighter funding conditions, ETF inflows slowing after 2024’s boom and a rotation of risk appetite out of bitcoin.

Bitcoin’s compressed trading range has reinforced the trend. Implied volatility, a gauge of expected price swings, is at just 40 after hitting a record low of 35 last week, Glassnode data shows. With volatility suppressed and institutional leverage light, futures premiums have remained capped.

If the Fed cuts rates, liquidity conditions could ease, boosting demand for risk assets. That in turn may lift CME futures open interest and revive the basis trade after a year of stagnation.