Coinbase Launches Bitcoin Yield Fund (CBYF) Targeting Institutional Investors

This Coinbase Bitcoin Yield Fund beginner guide will cover what you need to know about the fund, including how it works, generates yield

Coinbase, one of the world’s largest cryptocurrency exchanges, launched its Coinbase Bitcoin Yield Fund (CBYF) on May 1, 2025. The fund allows institutional investors to earn yields on their Bitcoin (BTC) investments without moving their holdings out of secure custody.

This Coinbase Bitcoin Yield Fund beginner guide will cover what you need to know about the fund, including how it works, generates yield, risks and stands out from previous Bitcoin yield attempts.

If you’ve ever wondered how to earn yield on Bitcoin with Coinbase, this guide provides answers.

Coinbase Bitcoin yield fund explained

The CBYF, which is managed by Coinbase Asset Management (CAM), offers a monthly subscription service for investors to buy or sell positions within the fund. However, all buy or sell requests require a five-business-day advance notice.

Backed by various investors like digital asset manager Aspen Digital, the fund aims to offer a 4% to 8% annual return on investment. Notably, it will never convert Bitcoin into any altcoin or stablecoin.

Unlike traditional funds that move assets around to trade, CBYF operates primarily through Coinbase’s institutional-grade, cold storage custody systems. This approach ensures security in several ways:

Did you know? Coinbase Custody, CBYF’s custody solution, maintains SOC 1 type 2 and SOC 2 type 2 compliance, making it one of the most secure crypto storage solutions.

How does Coinbase Bitcoin yield work?

Bitcoin doesn’t generate yield in the traditional sense. While many of its decentralized finance (DeFi)-focused competitors like Ethereum present multiple, built-in opportunities for yield generation through staking, using Bitcoin staking platforms requires extensive knowledge of layer-2 blockchain ecosystems.

While the everyday trader can always earn on Bitcoin through buying and holding it, yield farming via staking is a more consistent profit method for earning. Staking crypto is similar to keeping money in a traditional savings account with a bank. The bank uses your money for loans to other customers and you earn a share of the interest on those loans.

As a more approachable attempt to offer Bitcoin yield, CAM focuses on cash-and-carry arbitrage, a form of basis trading. Basis trading is a profit strategy in which investors take advantage of Bitcoin’s spread, or the price difference between the Bitcoin spot market and the futures market. Spot traders are buying Bitcoin in the moment, while futures traders enter a contract that says they’ll buy or sell Bitcoin for a certain price on a specific date.

Here’s an example:

While it’s impossible to predict Bitcoin’s price movement with 100% accuracy, basis trading is lower risk because it relies on somewhat predictable price movements rather than trust in a borrower.

So, when an investor puts money into the new Coinbase yield fund, CAM uses those funds to initiate a basis trade. CAM earns a profit and shares it with investors as yield. Coinbase believes that avoiding “riskier high-interest Bitcoin loans” and focusing on a more predictable basis for trading will lower risk and appeal more to institutional investors.

If CBYF performs well, it may expand to more traditional lending or derivatives offerings. CYBF is attempting something that even the best crypto yield platforms have yet to try.

Did you know? CBYF is one of many attempts to offer Bitcoin yield products. Other Bitcoin passive income attempts include Bitcoin lending and liquidity pools.

The risks of basis trading

Basis trading has a lower risk than other crypto passive income options, but the process is far from risk-free.

Here are some common risks in basis trading:

This isn’t to mention the regulatory and third-party platform risks.

For one, the CBYF isn’t open to US traders. Regulatory entities like the Securities and Exchange Commission have stood against Bitcoin products before, including Coinbase’s own Borrow offering, which enabled users to receive loans against their Bitcoin. Coinbase shut Borrow down in May 2023. The entity launched a similar product later that year, but only for institutional investors.

Instead, Coinbase is testing the CBYF internationally before bringing it into the United States.

Did you know? If Bitcoin’s price jumps too far (in either direction) while CAM holds a short position, the exchange must add collateral to avoid liquidation.

How is CBYF different from past Bitcoin yield attempts?

CBYF is built on the mistakes of previous Bitcoin yield attempts. One high-profile example was BlockFi, the now-defunct digital asset lending platform. BlockFi attempted a Bitcoin yield fund in 2019. BlockFi asked users to deposit Bitcoin into its platform, and would use that BTC for loans to institutions. Those loans would generate interest and BlockFi would pass that yield onto its users.

While this process worked for a time, state regulators came after BlockFi for selling unregistered securities. The SEC got involved and BlockFi had to settle by paying the SEC $50