Coinbase Asset Management is launching a new fund that aims to deliver a regular yield on a customer’s Bitcoin holdings.

The Coinbase Bitcoin Yield Fund, which is set to launch on May 1, will seek a 4% to 8% annualized net return, delivered in Bitcoin, and will only be open to non-US institutional investors.

The fund will employ a version of the so-called basis trade that is common in other financial realms. In the crypto version of the strategy, known as the cash-and-carry trade, traders look to take advantage of discrepancies between the price of Bitcoin and the price of derivatives tied to Bitcoin, known as perpetual swaps, or perps for short, which are essentially futures contracts that don’t expire. While the two prices should move in tandem, they are often disconnected, particularly when bullish traders are eager to capitalize on the rising price of Bitcoin and are willing to pay more to keep their perps positions open.

The dislocation between perps and spot Bitcoin prices tends to be the biggest — offering the most opportunity for profit — when the price of Bitcoin is going up. The yield is likely to be smaller or even negative when prices are going down. Investors will buy shares of the fund by depositing Bitcoin and will later be able to withdraw the underlying Bitcoin on a monthly basis.

The fund should allow investors to garner a yield on their Bitcoin holdings, which will make Bitcoin more competitive with other cryptocurrencies, like Ethereum and Solana, that can earn a yield through a blockchain-native process known as staking.

“Coinbase AM believes that the next cycle needs better products to enable institutional investment in digital assets,” said Sebastian Bea, President at Coinbase Asset Management. “We believe the Bitcoin Yield Fund is particularly well suited to the task, given its conservative and compliant investment strategy.”

Many offshore hedge funds are already generating yields on Bitcoin through basis trades, while Ethena, a crypto project that has attracted billions of dollars, gives smaller investors an opportunity to receive the returns from Ether-focused basis trades.

The kind of basis trade that the new fund is using is relatively low risk. But basis trades have gone wrong in notable ways in the past, particularly when firms have borrowed against their holdings to deliver bigger returns. The Coinbase fund is set to take on some leverage, but at a low level, the company says.

The fund aims to keep the underlying Bitcoin safe by holding them with Coinbase and “other qualified custodians.” The company warns investors that while it is targeting a return above 4%, “actual performance may differ materially.” The company, though, says that it will be safer than competing products that “take too much investment and operational risks.”

The fund is seeded by several investors including Aspen Digital, an Abu Dhabi-based private wealth management platform. The CEO of Aspen Digital, Elliot Andrews, said “Coinbase is the most trusted counterparty in the asset class and combined with a huge amount of investor demand for Bitcoin yield, we are looking forward to bringing this product to the private wealth market.”