Even If You Want to Short Coinbase (COIN), Think Twice Before Buying the FIAT High Yield ETF
Cryptocurrency
The Motley Fool

Even If You Want to Short Coinbase (COIN), Think Twice Before Buying the FIAT High Yield ETF

July 2, 2025
09:23 AM
5 min read
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But don't necessarily buy it as a bet against Coinbase.

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cryptocurrency

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Published

July 2, 2025

09:23 AM

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investmentmoneystockstradingtechnologyfinancialsmarket cyclesseasonal analysis

But don't necessarily buy it as a bet against Coinbase

Coinbase (COIN 5. 70%), one of the world's largest cryptocurrency exchanges, has been a volatile investment ever since its direct listing four years ago

It closed at $328. 28 per on its first day and eventually rose its record-high closing price of $357. 39 seven months later

But by Dec. 28, 2022, Coinbase's stock sunk to a record low of $32

It was crushed as rising rates and other macro headwinds chilled the crypto market

After soaring 766% in 2021, its trading volumes plunged 50% in 2022 and dropped 44% in 2023

Its total revenue, which had risen 545% in 2021, fell 57% in 2022 and 7% in 2023

Image source: Getty Images

Yet that slowdown eventually as interest rates declined, more crypto ETFs were apved, and the regulatory headwinds for the crypto market dissipated

In 2024, Coinbase's trading volume surged 148%, its total revenue rose 111%, and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) more than tripled

The bulls rushed back, and its stock now trades just slightly below its all-time high at around $356

That was a remarkable comeback, but Coinbase's stock isn't a screaming bargain at 11 times this year's sales

It could certainly deserve that higher valuation if it locks in more customers and the crypto market keeps expanding, but it could also lose its luster if the market cools off or it faces fresh competition from other crypto trading platforms

If that happens, then it might be smarter to short Coinbase's stock than to hold it

But if shorting Coinbase sounds too risky, you can take a closer look at Tidal's YieldMax Short COIN Option Income Strategy ETF (FIAT -3. 43%) -- which simulates a short position in Coinbase without selling or buying any of its s

How does FIAT short Coinbase without owning any s

To short a stock, you borrow someone else's s and sell them

If the stock price declines, you buy those s back, return them to the owner, and keep the difference as your fit

If the stock price rises, you still need to buy back the s and return them at a loss

For each day the short seller borrows those s, they pay borrowing fees

Short selling can only be done on margin since you're assuming debt by temporarily selling someone else's s, and margin accounts accrue and compound interest daily

Therefore, a short seller must cover those positions quickly to outpace those borrowing and interest fees

Fiat simultaneously buys puts and calls on Coinbase to create a "synthetic short position," which moves in the reverse direction as its stock without ever borrowing the s

That seems a much more complicated way to bet against Coinbase than simply shorting its stock, but most ETFs aren't structured in a way to consistently borrow s as a hedge fund would

Buying puts and calls is also a more cost-efficient apach because they don't incur any borrowing fees or direct interest

FIAT is also an income-oriented ETF In addition to its synthetic short position in Coinbase, FIAT writes cash-secured puts on Coinbase's stock to generate extra income

In a cash-secured put, you collect a premium by selling a put option (a mise to buy the stock at a lower price at a future date) on a stock you don't own -- but you need to lock up enough cash to fund that trade

If the stock drops to that level by then, you're obligated to buy the stock

If not, you keep that premium and your cash

So instead of buying Coinbase's s, FIAT sets aside enough cash to constantly sell cash-secured puts on the stock to generate extra income

It sells those puts out of the money (far below its actual trading price), so it doesn't accidentally buy those s

At the same time, FIAT parks its excess cash in U

Treasuries to earn additional income

It adds that income and put premiums to its total distributions

But does it make sense to buy FIAT

FIAT pays a jaw-dropping distribution rate of 55

But that rate is a lot less impressive when we consider that nearly 93% of that distribution is a return of capital (ROC) -- which means it's simply paying its investors their own cash

It also has a relatively high gross expense ratio of 0

Therefore, you're being charged a fee to only get a mid-single-digit yield on your original investment, which is awkwardly tied to a synthetic short position against Coinbase

Yet FIAT will also ly underperform a real short position against Coinbase because its own cash-secured puts will force it to buy the stock if it drops too quickly

That's why it isn't surprising that FIAT's stock price fell nearly 84% and completely erased the gains from its distributions over the past 12 months

If you're bearish on Coinbase, it makes sense to directly short the stock than to buy this odd income-oriented ETF

If you want income, ignore its high distribution and buy some more stable dividend ETFs

Leo Sun has no position in any of the stocks mentioned

The Motley Fool recommends Coinbase Global

The Motley Fool has a disclosure policy.