Overview
Coinbase Asset Management has unveiled a new Bitcoin Yield Fund specifically designed for institutional investors outside the U.S. The fund aims to secure an annualized return between 4% and 8%.
Key Highlights
- Launch Date: The fund is set to start on May 1.
- Initial Yield Generation: It will primarily utilize basis trading to generate returns initially, followed by potential inclusion of lending and options strategies.
- Basis Trading: The strategy focuses on capitalizing on the price difference between Bitcoin futures and spot prices, which, while potentially lucrative, also comes with inherent risks in volatile markets.
The ability to generate profits through these trading strategies became especially popular toward the end of 2024, as hedge funds significantly increased short positions in BTC, while also acquiring spot Bitcoin ETF shares.
Risks Involved: If market conditions change rapidly, as illustrated when a critical negative price movement in BTC might require additional margin to avoid forced selling.
Recent trends have shown a decrease in short positions in BTC trading, from $14.2 billion at its peak to $8.4 billion today.
Moreover, Coinbase’s announcement parallels the previous yield platform from BlockFi, which failed amid a significant crypto downturn in 2022. Unlike BlockFi, Coinbase’s method aims for Sustainable yield via lower-risk trading strategies.
