YieldMax Launches ‘FIAT’ ETF to Short Crypto Exchange Coinbase

Feeling bearish on crypto? There’s now an ETF to short Coinbase (COIN)—the premiere U.S. exchange platform viewed as an index for the entire industry’s success.

Set to launch on Wednesday, the YieldMax Short COIN Option Income Strategy ETF is designed to “seek inverse (opposite) exposure to the share price of the common stock of Coinbase Global,” subject to certain limits on investment gains, according to its summary prospectus.

YieldMax is an asset management company whose products purchase options contracts based on an underlying security. As if to mock crypto, the Coinbase-focused ETF will trade on NYSE Arca under the “FIAT” ticker.

“The fund’s potential for gains from decreases in the share price of COIN’s stock is limited,” the filing reads, noting that the fund “will not fully benefit” from any significant drawdown in Coinbase’s stock price.

The ETF will operate using a “synthetic covered put” writing strategy, incorporating various moving parts to both provide indirect inverse exposure to Coinbase stock, while also generating passive monthly income irrespective of Coinbase’s performance.

This involves simultaneously buying put options and selling call options for COIN stock, a practice that replicates inverse exposure to Coinbase’s stock movements. The fund will also sell short-dated put options on the same stock with a strike price 0%-15% below current prices, on which it will generate income.

Coinbase Donates $25 Million to Fairshake to Defeat 'Anti-Crypto Candidates'

Coinbase, America’s dominant crypto exchange, announced Monday that it has donated an additional $25 million to industry political action committee (PAC) Fairshake in the latest escalation of crypto-related spending on the 2024 election.  That spend brings Fairshake’s total haul this cycle to $160 million, making it one of the largest PACs attempting to influence the outcome of November’s election.  In fact, only ActBlue and WinRed—the primary payment processors for the Democratic and Republican...

“If the underlying security’s share price decreases beyond the strike price… the fund will lose money on those short put positions, and the losses will, in turn, limit the gains of the fund’s synthetic short exposure,” the filing warned.

In recent times, shorting COIN hasn’t been a wise move for long-term investors. The stock is up 171% over the past year and 43% year to date, showing relative stability during Bitcoin’s significant correction throughout the past five weeks.

YieldMax’s product joins a wave of increasingly sophisticated Wall Street products emerging around crypto since the dawn of Bitcoin spot ETFs in January. Weeks after their launch, Roundhill introduced its Bitcoin Covered Call Strategy ETF which used similar options arrangements to generate a 30% annualized yield for investors on its opening day.

“There is little doubt that investors continue to want to invest in the ‘crypto’ markets at large and YieldMax is dedicated to continuing to offer new ETFs to serve these investors,” said Gavin Filmore, chief revenue officer of Tidal—the white label ETF platform that helps operate YieldMax.

The company has already launched its COIN  Option Income Strategy ETF (CONY), which provides positive exposure to COIN stock using a covered call strategy. Meanwhile, its MSTY and YBIT ETFs provide covered call exposure to both MicroStrategy stock and spot Bitcoin ETPs, respectively.

“[We] believe that as market cycles shift some investors might want to express a short or negative view on COIN while still earning income,” Filmore added. “CONY, MSTY, YBIT, and now FIAT are all currently trading and have been met with significant interest from investors.”

Edited by Ryan Ozawa. Updated to add comments from Tidal.