Coinbase Launches Bitcoin Yield Fund for 4% to 8% Returns

Coinbase, a prominent cryptocurrency exchange, is set to introduce a new Bitcoin yield-generating product aimed at institutional investors. The Coinbase Bitcoin Yield Fund (CBYF) will be available starting May 1, 2025, providing non-US institutional investors with an opportunity to earn passive income on their Bitcoin holdings. The fund targets annual net returns of 4% to 8% on Bitcoin holdings, addressing the growing institutional interest in cryptocurrency.

Unlike other cryptocurrencies such as Ethereum and Solana, Bitcoin does not offer staking capabilities for holders to earn passive income. This limitation has created a gap in the market that Coinbase aims to fill with its new yield fund. The CBYF will initially generate its returns through basis trading, a strategy that profits from the price difference between spot Bitcoin and futures contracts. This approach is considered less risky than lending-based yield products that have faced troubles in the past.

According to Abu Dhabi-based Aspen Digital, one of the fund’s backing partners, lending and options strategies may be added in the future. Aspen Digital will also serve as an exclusive wealth-distribution partner across the UAE and Asia. This strategy differs from failed yield platforms like BlockFi, which relied on lending to generate returns. The basis trade has been popular among hedge funds, with short positions on Bitcoin futures reaching a record in late 2024.

The fund includes several key features designed to attract institutional investors. It will have monthly openings for subscriptions and redemptions with five business days’ notice, qualified custodians, and an estimated strategy capacity of $1 billion in assets under management. Coinbase has designed the fund to minimize risks associated with traditional Bitcoin yield products. Rather than moving assets out of storage, Coinbase Asset Management uses third-party custody integrations to trade, which they believe reduces counterparty risk.

The fund also avoids high-interest Bitcoin loans and systematic call selling, strategies that carry higher risk profiles. This conservative approach aligns with the risk appetites of most institutional investors. The launch of the Coinbase Bitcoin Yield Fund is another sign of growing institutional adoption of cryptocurrencies. As these large players continue to enter the market, new financial products are being developed to meet their specific needs and risk profiles.

As institutional crypto adoption grows, Coinbase Asset Management aims to provide solutions that blend traditional investment experience with digital asset expertise, removing barriers for institutional investors subject to fiduciary standards. The fund officially launches on May 1, 2025, and is currently available only for international investors outside the United States.