FIAT ETF Faces Trouble as Coinbase Defies the Bears
Tidal Trust II’s YieldMax Short COIN Option Income Strategy ETF (ticker: FIAT) boasts a headline-grabbing 56% distribution rate. But the reality behind that number is less impressive — most of it comes from returning investor capital, not gains.
Worse still, FIAT’s synthetic short position on Coinbase has backfired. With Coinbase rebounding in 2024, this strategy is becoming increasingly risky.
Coinbase’s Wild Ride Since Its IPO
Coinbase went public via direct listing in April 2021, closing at $328.28 on its first day. The stock reached a high of $357.39 soon after. However, macro pressures sent Coinbase plummeting — reaching just $32.53 by the end of 2022.
In 2021, Coinbase posted explosive growth: trading volume surged 766% and revenue jumped 545%. But that reversed sharply in 2022 and 2023, when volume and revenue both declined significantly.
The Comeback That Crushed FIAT’s Strategy
By 2024, crypto markets rebounded. Interest rates cooled, crypto ETFs gained approval, and regulators softened their stance. As a result, Coinbase’s trading volume rose 148%, revenue jumped 111%, and adjusted EBITDA more than tripled.
Coinbase now trades near $356 — just shy of its all-time high — making FIAT’s synthetic short position a serious liability.
How FIAT Shorts Coinbase Without Buying Shares
FIAT doesn’t short Coinbase directly. Instead, it uses options strategies to simulate a short position. These strategies aim to generate income while benefitting from a drop in Coinbase stock.
This method avoids directly borrowing and selling shares, but it’s still risky. If Coinbase rises sharply, as it has, these synthetic positions can lose value quickly — while the high “distribution rate” misleads some investors.
Understanding the Risks of Shorting Coinbase
Short selling is inherently risky. If Coinbase continues climbing, short sellers — real or synthetic — face mounting losses. Short strategies also require margin accounts, which accrue daily interest and fees.
FIAT’s investors should understand that while its strategy might appeal during bearish cycles, it has underperformed dramatically during Coinbase’s recovery.
Is Coinbase Still a Buy at These Levels?
Despite its strong comeback, Coinbase trades at about 11 times 2024 sales. That may not seem cheap, but bulls believe continued crypto adoption and customer growth could support the valuation.
Still, if the crypto market cools or competitors gain traction, Coinbase could face pressure again — which might validate FIAT’s approach in a future downturn.
Caution Advised for FIAT ETF Investors
FIAT ETF might sound attractive for investors skeptical of Coinbase, but its current strategy has struggled. With Coinbase posting record revenue and strong momentum, betting against it has proven costly.
Unless market conditions shift dramatically, FIAT’s short bet on Coinbase may continue to underperform. Investors should weigh the real risks and not be misled by flashy yield figures.