The hits keep on coming.
I know I sound like a broken record but Wall Street has a new toy. Cryptocurrency is a windfall for the industry. The Bitcoin Spot ETF was only the first of a wave of financial products that will be built using Bitcoin and other crypto.
At some point, I think we are going to see a flood of innovation. It will get to the point where it is not even newsworthy. People will find out about it by pulling the filings with the SEC to see what these major firms are doing.
For now, these rollouts tend to make headlines within the cryptocurrency industry. That means we are still in the scarcity stage. It might last through the rest of this year but my expectation is things will accelerate.
Coinbase is getting ahead of the Bitcoin Yield Fund curve by bringing a product out while legislators deal with the upcoming regulations.
Coinbase is launching a fund that pays a yield. It is based upon Bitcoin.
The SEC recently ruled that stablecoins are not securities and will not be treated as such. It did not include yield bearing stablecoins (ones that pay the interest to the coin holders) in that decision.
That means the SEC is still unclear on whether these assets are securities.
Coinbase is getting around this by not opening this up to the public. Instead, this is for institutions only, meaning the process is different. Basically, the SEC feels that institutions do not require the "protection" from the agency like the public does.
Here is what it is doing:
Crypto exchange Coinbase (Nasdaq: COIN) announced on April 28 the launch of the Coinbase Bitcoin Yield Fund (CBYF), a new initiative targeting institutional investors seeking bitcoin yield with mitigated risk.
This fund is a conservative strategy that seeks a 4-8% net return in bitcoin per year, over a market cycle, with investors subscribing and redeeming in bitcoin.
Set to officially open on May 1, the CBYF will accept monthly subscriptions and redemptions with a five-business-day notice period. The strategy is forecast to accommodate up to $1 billion in assets under management and will initially be available only to non-U.S. investors through qualified custodians.
Wall Street is doing something we have talked about for years. Crypto's success is dependent upon innovation. Simply bringing out a new coin and doing some hype is not innovation. Instead, the industry has to build from the ground up.
Where that failed, Wall Street is stepping in. We already see the massive change from even 15 months ago. Large entities are only getting started. Coinbase is not the biggest fish out there. What do you think Goldman Sachs, JPMorgan, and State Street will do once they decide to dive in?
CBAM emphasized that CBYF differs from typical bitcoin yield strategies, which often involve substantial investment or operational hazards. Instead of adopting practices that heighten risk, CBYF’s structure addresses security concerns head-on. The company described: “Rather than move assets out of storage, Coinbase AM uses third-party custody integrations to trade, which we believe significantly reduces counter-party risk. Additionally, our investment strategy avoids riskier high-interest bitcoin loans and systematic call selling.”
Years ago I stated how Bitcoin was Wall Street money. There was some pushback with people claiming it was "the people's money".
Does anyone still believe that?
Who is holding all the Bitcoin? Wall Street custodians for the Bitcoin ETF now has over 1 million BTC. Michael Saylor's strategy is somewhere around $600K. Even this fund by Coinbase, is targeting $1 billion in Bitcoin.
From a HODLer perspective, this is a good deal. Higher prices could be the future due to the fact that major entities will be amassing large amounts of Bitcoin.
Honestly, if Coinbase opens a Bitcoin based fund, and it targets $1 billion, we can presume that whatever Fidelity and Blackrock do will be at least 10x that (apiece).
Look at IBIT, Blackrock's Bitcoin ETF. It now has over $47 billion in assets according to Yahoo Finance. This thing is only about 500 days old.
Even ARKB which is the ETF from Ark Invest, is nearing $4 billion in assets. Here again, we are not talking about a major Wall Street firm.
Ultimately, there will be yield funds approved by the SEC related to cryptocurrency. This will likely be mostly focused upon BTC although others could be used. The firms will go through the process of getting approval, complying with the regulations.
That will be another case where people flood into these assets driving more purchasing. While it would help prices, it will drive more power into the hands of Wall Street.
The hijacking continues.
