Coinbase is set to launch the Coinbase Bitcoin Yield Fund (CBYF) on May 1, 2025, targeting institutional investors with expected annual net yields ranging from 4% to 8%, paid in Bitcoin.

This fund aims to address the growing demand for yield-generating crypto products, especially since Bitcoin typically does not offer passive income.

Prominent figures in the crypto space, such as Michael Saylor, have encouraged further Bitcoin investments amid increasing institutional interest.

The fund will employ a basis trading strategy, leveraging price differences between Bitcoin spot and futures markets, a method that has gained traction since late 2024.

Yield generation for the fund will utilize a cash-and-carry strategy, capitalizing on price discrepancies between spot Bitcoin and derivatives.

CBYF will adopt a conservative investment approach, minimizing risks by avoiding high-risk trades and utilizing third-party custody integrations for secure asset storage.

Coinbase plans to manage up to $1 billion in assets for the fund, ensuring secure custody solutions to mitigate counterparty risks in the digital asset market.

Currently, the fund is exclusively available to international investors, which may enhance Bitcoin's appeal among traditional asset holders.

Investors will have the flexibility to subscribe and redeem their investments on a monthly basis, requiring a five-business-day notice for transactions.

Despite its potential, the Bitcoin Yield Fund faces challenges such as market dependency, regulatory risks, and limited historical data.

Coinbase Asset Management aims to bridge traditional investment practices with expertise in digital assets to facilitate institutional engagement.

The launch of CBYF echoes the rise and fall of BlockFi, which introduced its yield product in 2019 but collapsed in 2022 amid declining crypto prices.