It's not news to most crypto old timers that Coinbase is a big player in the ecosystem and most things they are involved with creates lasting impact.
Starting with Coinbase, the exchange, USDC, which they make more money from than Circle, the literal issuing company, Base blockchain, which has captured quite the value from the Ethereum ecosystem even without a native token, all of these things down to the numerous projects funded by its VC arm, Coinbase Ventures.
This is a company that's directly working with Blackrock as a Custodian of its BTC for Blackrock’s spot bitcoin ETF. I mean sure, no surprise there, Blackrock happens to also be a key investor in Circle and probably has other strategic investments tying the two companies.
All of this paints a picture of what financial pull comes from Coinbase and how that might influence crypto investment products it puts out there.
Hint: it's all about the ripple effect.
Coinbase, the world’s third-largest cryptocurrency exchange by volume, is launching the Coinbase Bitcoin Yield Fund on May 1, aiming to offer Bitcoin exposure for institutional investors outside the US.
The fund targets an annual net return of 4% to 8% on Bitcoin holdings, according to an April 28 blog post by Coinbase.
“To address the growing institutional demand for bitcoin yield, Coinbase Asset Management is excited to introduce the Coinbase Bitcoin Yield Fund (CBYF),” the company wrote.
The fund is backed by multiple investors, including Aspen Digital, a digital asset manager based in Abu Dhabi and regulated by the Financial Services Regulatory Authority.
The yield will be generated through a cash-and-carry strategy, through the difference between spot Bitcoin prices and derivatives. - Cointelegraph report
Yield on Bitcoin is something I've talked about recently, precisely as the one way to avoid institutions sweeping up all of Bitcoin's supply.
Coinbase understands that if decentralized yields solutions for Bitcoin grows, it would reduce how much of BTC supply can be forced into centralized custody, so it is jumping in early to create a solution investors that are Bitcoin bulls may chase after.
The best way to capitalize on an asset people want to hold for the long-term is to create yield incentives so that people hand over said assets to you.
A 4-8% safe yield on Bitcoin is a lot of money, considering what role bitcoin plays in this ecosystem and how its performance has been over the years.
Now if we pay close attention to how Coinbase intends to generate this yield, market arbitrage seems to be the strategy in play here and I would expect that this includes farming funding rates in some form.
Pretty much have this in the bag considering they literally control the markets alongside other names(that I won't mention today) in the business.
What does this mean for the price of BTC?
I'm not going to sit here and tell you that Coinbase launching a yield product on Bitcoin will pump the BTC price by itself. I could have done that when Bitbonds first got mentioned in the news, considering that with Bitbonds, we are looking at trillions from government issued debt packing in BTC.
That said, what I will tell you is that moves like this tend to have a FOMO amongst institutional builders.
What this means is that we are bound to see a lot more Bitcoin yield products from various other companies.
With more products hitting the market, Bitcoin earns more exposure and essentially attracts more investments.
Considering that a lot of focus will be on yield, and most of this yield will have to come from trading activities and debt has to be created in a lot of ways to fund things, we are likely in for some serious Bitcoin price actions.
What yield products on Bitcoin aims to replicate is yield available to proof of stake assets like ETH and with BTC being a more valuable market, there's bound to be insane demand, I mean, it is called digital gold after all and gold has historically performed really well.
Bitcoin's performance beating traditional assets whilst having yield solutions is a recipe for smashing through the $1 Million price target.
Of course, decentralized tech enthusiasts like us can only hope that non-centralized solutions for Bitcoin yields will emerge in great numbers and compete.