Coinbase launches Bitcoin Yield Fund to allow investor earn passive income in BTC

Bloomberg reveals that Coinbase Asset Management will roll out a new investment product this week, on May 1.

The upcoming Coinbase Bitcoin Yield Funds aims to offer non-US institutional investors an opportunity to earn consistent returns on their BTC holdings.

Participants will enjoy yearly net profits of between 4% and 8%, paid in Bitcoin.

The new investment vehicle presents a competitive alternative to yield-generating cryptocurrencies like Solana and Ethereum, which offer staking rewards.

Notably, Coinbase leverages the “cash-and-carry” trade strategy to help institutional players maximize returns on their Bitcoin holdings.

Coinbase Asset Management president Sebastian Bea commented on the move, stating:

Coinbase AM believes the next cycle needs better products to enable institutional investment in digital assets. We believe the Bitcoin Yield Fund is particularly well suited to the task, given its conservative and compliant investment strategy.

The “cash-and-carry” trade strategy: what is it about?

The Coinbase BTC Yield Fund will use the cash-and-carry trade approach.

Common in traditional finance, the strategy leverages the price differences between BTC spot (market price on exchanges) and BTC perpetual swaps.

Perpetual swaps are futures contracts that do not expire. Thus, their prices should mimic Bitcoin’s actual value.

Nonetheless, that’s not usually the case.

Perp prices diverge from spot values during market rallies as the bulls rush to capitalize on the optimistic trends.

Coinbase Bitcoin Yield Fund leverages the misalignment to generate passive income for BTC investors.

The fund’s approach will work best amid Bitcoin rallies as the price discrepancy widens.

The only risk is that the yields reduce or become negative during bearish markets.

Only for non-US customers

Details show that only companies outside the US can participate in Coinbase’s new fund.

That could be due to the United States regulations on crypto offerings.

Meanwhile, eligible institutional players can invest by depositing Bitcoin assets into the fund to own a share of the Coinbase Bitcoin Yield Fund.

While promising considerable returns, the team has guaranteed it will ensure low leverage to reduce risks.

Moreover, customer funds will remain on Coinbase and other authorized custodians to secure underlying assets.

Crypto market overview

The new product from Coinbase Asset Management comes as digital assets eye robust gains.

Bitcoin displays resilience as it held above $90,000 in the past week, teasing a break past the crucial obstacle at $95,000.

The prevailing sentiments support continued recovery for Bitcoin.

Investors are purchasing the top asset after its latest rebound, indicating conviction of extended rallies.

Bitcoin trades at $95,390, and a decisive candlestick closing above $95,000 would catalyze steady rallies to new ATHs beyond $110,000.

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