Kraken Institutional has partnered with Bitwise Asset Management to launch its first managed investment strategy for institutional clients. The product, named the Bitwise Custom Yield Strategy, is designed to generate income from otherwise idle crypto assets, specifically focusing on Bitcoin holdings.
Under the arrangement, Bitwise manages the portfolio's daily strategy while Kraken provides custody, trade execution, and risk oversight. A key feature is that client assets remain within Kraken's custody throughout the process, eliminating the need to transfer crypto across multiple platforms to access yield—a move aimed at reducing operational friction and counterparty risk for institutions.
The strategy employs a covered call options approach on Bitcoin. Bitwise sells call options against the BTC held in custody, collecting premiums as income. This structure, common in traditional markets, is intended to provide a predictable yield stream and a partial buffer during market declines, as earned premiums may offset some losses if Bitcoin's price falls. However, it also caps potential gains during strong rallies, as profits above the sold options' strike price are forfeited.
Gurpreet Oberoi, Head of Kraken Institutional, stated, "This offering represents the first of multiple strategies as we build the infrastructure institutions need to access diverse crypto opportunities with confidence." The exchange plans to expand this offering by adding more external asset managers and investment strategies in the future, moving beyond core custody and trading services.
This launch addresses a growing need among institutions that hold crypto on balance sheets but generate little yield from those positions. By integrating managed strategies directly into its platform, Kraken aims to simplify the historically fragmented process of coordinating across custodians, derivatives venues, and asset managers.
