
Even If You Want to Short Coinbase (COIN), Think Twice Before Buying the FIAT High Yield ETF
Key Takeaways
But don't necessarily buy it as a bet against Coinbase.
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cryptocurrency
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July 2, 2025
09:23 AM
The Motley Fool
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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.
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