After years of scandals, including the spectacular implosion of FTX, Blockstream is betting that deep-pocketed investors are ready to revisit bitcoin investment strategies that provide passive income, especially if they do not have to compromise on safety.
The Montreal-based company, led by cryptography pioneer and Satoshi Nakamoto’s first collaborator Adam Back, is making a move into asset management with a set of funds under its new Blockstream Asset Management (BAM) division.
Though investors now have access to a variety of bitcoin instruments—from spot and futures ETFs, funds targeting 2x bitcoin returns, MicroStrategy’s convertible bonds, and even Coinbase’s newly revived bitcoin-backed loans—the menu for comprehensive, risk-managed lending strategies, especially for for institutions and accredited investors, remains limited. Blockstream wants to fill that gap.
“We want to be the service provider that opens the door to this new asset class beyond just beta exposure and ETFs,” says Sean Bill, Blockstream’s newly appointed chief investment officer. “We need to deliver a good, risk-adjusted return to investors in a category where they can’t really easily access some of these strategies right now.” Bill joined Blockstream in November after serving as CIO at Prime Meridian Capital Management, a fintech-focused hedge fund, and as treasurer and CIO of the Santa Clara Valley Transit Authority.
The three funds—the Blockstream Income Fund, Blockstream Alpha Fund, and Blockstream Yield Fund—are designed to appeal to a wide range of risk appetites and objectives.
- The Income Fund is designed to provide bitcoin-backed loans to companies with bitcoin treasuries, enabling them to borrow cash without selling their bitcoin. The fund targets smaller loans, ranging from $100,000 to $5 million, with typical loan-to-value (LTV) ratios of 25% to 65% to ensure robust collateral coverage. Borrowers will pay interest based on loan maturity, LTV, and market conditions, generating returns for investors. Annual yields are projected in the “high single digits to mid-teens.”
- The Alpha Fund is geared toward investors seeking higher returns through more complex strategies, such as basis trading (exploiting pricing gaps between spot and futures markets) and derivatives trades. Part of the fund’s capital will flow into the Income Fund, and certain strategies may be outsourced to specialized third parties.
- The Yield Fund, billed as a bitcoin alternative to money market funds, targets annual returns of 1.5% to 3%. It will lend bitcoin to institutions, such as exchanges and ETF providers. Borrowers will pay interest on the borrowed bitcoin, generating modest but consistent yields for fund participants.
Two of the funds, Income and Alpha, are set to launch this quarter, with the Yield following in the second quarter. The company plans a global rollout: U.S. funds will be registered in Delaware, while offshore versions will be based in the Cayman Islands. Fee structure is still being finalized.
Blockstream isn’t the first to pitch institutional-focused bitcoin products, but it brings established credentials. The firm is known for its work on the Liquid Network, a bitcoin sidechain that allows for faster, more confidential transactions and the issuance of digital assets like stablecoins and tokenized securities.
To support its funds, Blockstream will partner with platforms including Unchained Capital, Hodl Hodl, and Debifi, which will originate loans and provide liquidity. They rely on multi-signature escrow contracts to manage bitcoin collateral, enforce LTV thresholds, and handle liquidations if necessary. Blockstream also plans to partner with exchanges and custodians to bolster its lending and borrowing operations.
The firm’s pitch emphasizes transparency and risk control. Custody for offshore funds will be handled by Komainu, a Nomura-backed custodian based in Jersey, in which Blockstream recently invested $75 million. For U.S. operations, the company will use a “qualified custodian” as needed, according to Bill. Monthly net asset value (NAV) reporting, detailed quarterly disclosures, and independent audits—currently being finalized—will be standard.
“We were already looking at the bitcoin yield strategies before FTX and other failures that happened in the last few years,” says Back, Blockstream’s CEO. “Because we’re using secure dependable bitcoin technology, partners with multi-sig custody, we are staying away from that kind of technology risk, and institutional and pro traders are becoming more aware of platform risk. We hope that lessons are learned.”
