New Bitcoin Yield Fund from Coinbase Seeks 4%-8% Annual Returns

Coinbase Rolls Out Bitcoin Yield Fund Aiming for 4%-8% Returns

Coinbase has unveiled a new Bitcoin yield fund targeting annual returns of 4% to 8%, designed for institutional investors. The fund, which is set to launch on May 1, is intended to cater to non-U.S. institutional clients and will initially focus on basis trading, with plans to expand to include lending and options strategies in the future.

In a collaboration with Aspen Digital, a firm based in Abu Dhabi, Coinbase aims to deliver returns by leveraging the price discrepancy between Bitcoin’s spot market and futures market. This basis trading strategy has been growing in popularity, particularly after large hedge funds took advantage of it in late 2024, profiting from the widening spreads between the spot and futures prices of Bitcoin.

The strategy carries inherent risks, especially in volatile markets. For example, a surge in Bitcoin’s price while a fund holds a short position could lead to a margin call. Despite the risks, basis trading has proven profitable for many institutional investors, and Coinbase’s fund will capitalize on these opportunities with a targeted return range of 4%-8%.

However, the diminishing yield from the basis trade as more funds have entered the market may put pressure on Coinbase’s ability to maintain high returns. Additionally, the strategy comes with the potential for significant market exposure, depending on Bitcoin’s price movements.

This move by Coinbase comes as institutional interest in Bitcoin grows, although it remains cautious after the tumultuous downturn of 2022, which saw the collapse of companies like BlockFi. Unlike BlockFi’s more aggressive lending strategy, Coinbase’s fund will aim for a more conservative approach through basis trading, which could appeal to risk-averse institutional investors.