Coinbase Launches New Bitcoin Yield Fund with 4%-8% Returns Target
Coinbase is launching a new fund tailored to institutional investors seeking to earn yield on their bitcoin (BTC) holdings. Set to open on May 1, the Coinbase Bitcoin Yield Fund will initially offer returns through basis trading, with plans to incorporate lending and options strategies in the future, according to its launch partner, Aspen Digital.
Designed for non-U.S. institutional investors, the fund is targeting an annualized net return of 4% to 8%, as outlined in a press release on Monday. Aspen Digital, based in Abu Dhabi, is backing the fund and explained that yield will first be generated through basis trading. Lending and options strategies will be explored down the road.
Basis trading involves profiting from the spread between the futures and spot markets. The strategy gained popularity in late 2024, when hedge funds hit a record $14.2 billion in short BTC positions while simultaneously purchasing bitcoin ETF shares in the spot market. The yield from basis trading depends on the spread between both markets, though it carries significant risk. For example, if the price of bitcoin were to surge dramatically while an entity held a large short position, it would need to add margin to avoid liquidation.
As the strategy has become more widely adopted, the spread and potential yield have diminished. This has prompted some hedge funds to exit the trade earlier this year, with short positions on the Chicago Mercantile Exchange dropping from $14.2 billion to $8.4 billion in just four months.
Coinbase’s latest offering brings to mind the crypto lender BlockFi’s yield product, which launched in 2019 but eventually faltered alongside the market downturn in 2022. However, unlike BlockFi’s lending-based yield model, Coinbase’s fund will focus on the more conservative basis trade, potentially reducing some of the risks associated with lending.
