The new Coinbase fund explained
On May 1, 2025, Coinbase launched its Bitcoin Yield Fund (CBYF) – a new opportunity for institutional investors to earn a return on their Bitcoin investments without having to move funds out of a secure (cold) wallet. The fund is managed by Coinbase Asset Management (CAM) and is designed as a monthly investment product that allows entry and exit of positions with five business days’ prior notice. The fund aims to achieve an annual return of between 4% and 8%, while never converting Bitcoin into other crypto or fiat currencies. What makes CBYF special is its emphasis on security, transparency, and stable return, without relying on risky strategies like crypto-lending. The funds remain under institutional custody of Coinbase , which means there is no exposure to unsafe exchanges or the use of “hot” insecure wallets.
Source: cointelegraph
How does Coinbase Bitcoin yield work?
Unlike other cryptocurrencies like Ethereum, Bitcoin itself does not generate yield in the traditional way. Ethereum, for example, offers the possibility of generating passive income through staking, but Bitcoin was created without such mechanisms. There are platforms that offer so-called “Bitcoin staking”, but they rely on more complex layer-2 solutions, which requires deep technical knowledge and additional security risks. That’s why the Coinbase Bitcoin Yield Fund presents a simpler alternative – it allows institutional investors to earn yield without having to leave the underlying Bitcoin network or expose themselves to experimental DeFi tools. The fund uses strategies such as basis trading within a secure institutional environment, combining a more conservative approach with a stable return.
Source: cointelegraph
How does the fund generate yield?
The Coinbase Bitcoin Yield Fund uses a strategy known as basis trading, which is based on the difference between the price of Bitcoin on the spot market and its price on the futures market. For example, let’s imagine that John buys one Bitcoin at a price of $90,000. At the same time, he opens a short position in which he commits to sell that Bitcoin for $95,000 in three months. No matter what the market price of Bitcoin is in three months — be it $85,000 or $100,000 — Ivan will sell it for a pre-agreed $95,000. In this way, it generates a gross profit of $ 5,000, minus transaction and maintenance fees. This difference of 5,000 is called the spread or basis, and it is this amount that represents Ivan’s return. The Coinbase fund uses this strategy on behalf of investors, but in a strictly controlled and secure environment, without exposing them to volatile platforms or excessive market risks.
Source: cointelegraph
Risks of Basis Trading
While basis trading carries lower risk compared to other passive earning methods in the crypto world, it is not risk-free. The first and most important challenge is market volatility – the price of Bitcoin can rise or fall by several thousand dollars in a short time. If, for example, Coinbase Asset Management (CAM) holds a short position at 85,000 and the market price of Bitcoin suddenly jumps to 100,000, the exchange will require additional collateral collateral or even liquidate the position. Another risk is the narrowing of the spread – as more traders and institutional investors try to take advantage of this strategy, the difference between the spot and futures prices of Bitcoin is narrowing. This directly reduces the yield, which was initially estimated at 4–8% per year.
In addition to market risks, there are also regulatory risks. The CBYF is currently not available to US investors, as US regulatory institutions, such as the SEC, have a history of opposing Bitcoin financial products. Coinbase, for example, shut down its “Borrow” service in 2023, which allowed users to obtain loans against Bitcoin collateral. New products, such as CBYF, are tested outside the US precisely because of regulatory uncertainty.
Source: cointelegraph
How CBYF is different from previous Bitcoin yield attempts
CBYF was created in response to the mistakes of previous attempts to make yields on Bitcoin, such as the now-defunct platforms BlockFi and Celsius. In 2019, BlockFi offered users a yield on Bitcoin by lending their cryptocurrencies to institutions. But due to undeclared securities and regulatory issues, the company paid hefty fines, ceased operations, and eventually went bankrupt. Celsius fared similarly, offering attractive returns but investing users’ funds in high-risk DeFi projects without proper control – leading to the collapse and jail time of its CEO.
In contrast, the Coinbase Bitcoin Yield Fund does not rely on lending or experimental DeFi protocols. Instead, it uses market strategies such as basis trading and stays within the safety and regulatory standards of institutional investors. But while the CBYF stands out for its more conservative approach, it still carries risk, especially in an unstable crypto environment. In addition, the fund is not intended for retail investors, but exclusively for institutions outside the US.
For the average user, the safest way to store Bitcoin remains your own cold wallet, with no intermediaries and no third-party risk. CBYF may be interesting to institutional investors, but for most HODL-ers – not your keys, not your coins still remains the golden rule.
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