Superstate launches high yield carry fund for Bitcoin and Ethereum using tokens

For crypto investors, there has long been an arbitrage opportunity in the spread between the Bitcoin price in the futures market and the spot market price. The problem is, this corner of finance, known as cash and carry or basis trading, requires a significant amount of time and attention to detail to capitalize on. That’s why Superstate, a crypto firm that specializes in tokenizing traditional financial services, has created a new Crypto Carry Fund that gives wealthy investors exposure to spot and futures market spreads in the form of the Ethereum ERC-20 token.

Superstate was founded by Robert Leshner, a former banker best known for founding Compound, one of the first and most successful DeFi platforms in the crypto world. In an interview with Fortune, Leshner said that some sophisticated investors have been earning a yield premium from the arbitrage opportunity in spot and future crypto prices for years. However, by creating a token to execute the trade, he says Superstate makes the process more accessible and also more liquid, as investors can trade the tokens (known as USCC) with each other.

Superstate raised $14 million late last year and is launching its first fund in early 2024, offering tokenized versions of familiar products like Treasury bonds. The new Crypto Carry fund will primarily invest in arbitrage opportunities in both Bitcoin and Ethereum, but will instead put investors’ money in Treasury bonds and other safe investments when spreads are not an issue. Unlike hedge funds, there is no lock-in and returns are available daily.

Superstate co-founder Jim Hiltner said the new Superstate fund will charge clients a fee of 75 basis points, which is a better deal for investors than those seeking crypto carry exposure through hedge funds, which charge a so-called 22-basis rate. Hiltner also noted that the fund is structured to not be vulnerable to margin calls and will carry a cash buffer in any event.

The biggest problem for most investors is that the new fund is only open to so-called qualified buyers with $5 million in assets, with the minimum purchase being $100,000. Superstate’s founders say they hope to make the assets more widely available over time, but for now the new fund is groundbreaking because it is fully compliant with current U.S. regulations.

In the bigger picture, SuperState is at the forefront of a growing corner of the crypto industry that aims to tokenize traditional assets. While firms including banks have been toying with the idea of ​​“real-world assets” on the blockchain for years, the idea finally appears to be gaining momentum as Wall Street fully embraces crypto. Indeed, traditional finance giants are making a move, including Goldman Sachs, which said it will launch three tokenization projects by the end of the year.

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Leshner notes that SuperState’s first fund has already reached $100 million in assets, and that some big names from the traditional finance sector will soon join a recently launched industry council dedicated to tokenizing real-world assets.

“We’re getting exactly the momentum we wanted,” Leshner says. “More important than AUM is the engagement of intermediaries, such as prime brokers, in crypto.”

This story was first published on Fortune.com