A new exchange-traded fund (ETF) has landed, offering cryptocurrency bulls a unique exposure profile to an industry leader.

The YieldMax COIN Option Income Strategy ETF (CONY) debuted on the NYSE Arca on August 15. The fund aims to deliver monthly income through a synthetic covered call strategy based on the stock price of the crypto exchange Coinbase.  

Managed by ZEGA Financial, renowned for its derivative-based funds, CONY joins a growing family of income-focused ETFs that track major players in the tech industry. Standout funds include Google, Amazon, and Meta (formerly known as Facebook). ZEGA also added a Netflix ETF to the mix earlier this month. 

Big brand tech stocks are among the easily recognizable and sought-after equities. Yet most reinvest their profits into further expanding their burgeoning businesses, denying investors dividends. 

That’s where ZEGA’s YieldMax funds come in. The value proposition is simple – the funds provide ongoing cash payouts with the vast growth potential of tech giants. It may only work out that way for some funds, though.

CONY intends to pay monthly dividends but does not guarantee them, per its prospectus. The fund’s performance is tethered to the underlying stock’s price movements, and unfavorable market conditions could trigger steep losses.

“Investors have turned to growth stocks in 2023 but many of them do not pay a dividend,” Todd Rosenbluth, head of research at VettaFi, commented about the fund. “With the new ETF, investors can earn income and potentially protect the downside while gaining exposure to a growth company.”

The launch of CONY comes at a time when Coinbase has received growing enthusiasm from market participants. 

The Base Case

As the leading crypto exchange in the U.S. and second globally only to Binance, Coinbase has become a pillar of the still emergent crypto industry. Its stock has done well so far in 2023, with its price more than doubling year-to-date. 

Yet Coinbase faces regulatory risks. The Securities and Exchange Commission (SEC) has been hot on its heels after launching a renewed crackdown on crypto in the wake of the collapse of former rival exchange FTX, an event that destroyed billions in investor capital. This year, the Federal agency has moved against Coinbase’s larger competitor Binance. It also requested Coinbase halt trading in almost all cryptocurrencies before suing Coinbase in June. 

Yet even while the SEC’s war on crypto rages on, Coinbase has won battles in other corners of the regulatory landscape. 

This month Coinbase gained approval from the Commodity Futures Trading Commission to handle customers’ buying and selling of Bitcoin and Ether futures. This is a significant feat, making Coinbase the first crypto-native company to register as a futures commission merchant. It also could also add weight to industry arguments that some cryptocurrencies be treated as commodities rather than securities, thus requiring a lighter regulatory scheme.

It is unclear who will emerge victorious from the ongoing showdown over crypto. Yet regulatory decisions, along with cryptocurrency adoption trends, will no doubt be a primary driver of Coinbase’s price performance going forward. 

CONY, as an actively managed fund, charges an annualized expense ratio of 99 basis points. 

Coinbase is currently swapping hands above the $70 mark, while CONY is currently trading around $18.

Originally posted at Wealth of Geeks.

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