CONY: I Expect Muted Volatility For Cryptocurrency Ahead

Summary CONY ETF delivered impressive total returns in the past, largely driven by high option premiums during periods of extreme COIN volatility. COIN stock volatility has recently declined and is likely to remain muted due to regulatory clarity and market maturation. As such, I expect CONY’s future income potential to decline and its past performance unlikely to sustain. Though it may still offer solid returns versus traditional assets such as bonds, equity, and/or precious metals. CONY ETF: solid past performance We routinely follow several covered-call option funds as they provide a new potential return vector. The key return driver for traditional assets (such as bond, equity, and precious metal) is price change. These alternative assets allow investors to benefit from market volatility. This is where the YieldMax COIN Option Income Strategy ETF (CONY) caught my attention recently. The CONY ETF currently provides a yield of 155% as of this writing (see the next chart below), not only extreme by normal standard but also among covered-call funds. Looking closer, I am impressed by its performance thus far. Most covered-call funds suffer capital depreciation as a price of their high yield (for reasons to be detailed later). In many cases, the dividend payouts are insufficient to make up for the capital loss, translating into a negative total return. But this is not the case for CONY. It is true that CONY has experienced capital loss too. As seen in the top panel of the chart below, its prices fell from about $19.8 per share at its inception to the current level of just $7.2, a loss of about $12.6. However, based on CONY’s dividend history , its monthly payouts have totaled $30.68 thus far since inception as shown in the chart below. Hence, a CONY investor would have enjoyed a net gain of almost $18 and a net gain of almost 100% assuming he/she bought it at the inception price and held it since then. Next, I will argue why such past performance is unlikely to continue as I expected muted volatility for both cryptocurrency and Coinbase Global Inc. ( COIN ) stock ahead. Seeking Alpha CONY ETF: basic facts Before diving in, a quick review of the basics could be helpful for readers new to the fund. The key for CONY to generate triple-digit yields is the use of an option overlay as detailed in the fund description below: CONY fund overview: CONY aims to generate monthly income while providing exposure to the price returns of Coinbase Global Inc. stock ( COIN ), subject to a cap on potential gains. The fund utilizes a synthetic covered call strategy via standardized exchange-traded and FLEX options, which consists of three elements: i) synthetic long exposure, ii) covered call writing, and iii) US Treasurys for collateral. As a reflection its above option overlay, the next screenshot tabulates its top holdings of this writing (August 19, 2025). As seen, the top holdings indeed consist of A) various treasury bills as collateral, and B) several short-term call options on the COIN stock with expiration ranging from August 22 to Oct 17. Next, I will detail the implications of these holdings on its total return potential. CONY fund facts CONY ETF: income generation likely to decline With the above exposure, CONY’s income generation is sensitive to the volatility of COIN stock, which directly impacts the option premium that the ETF receives. CONY’s past performance largely benefited from the above-average volatility that COIN stock has experienced in my model (which in turn is impacted by volatilities in cryptocurrencies). As you can see from the following chart, COIN exhibited some of the most extreme volatilities in late 2024 (approaching a 3-year peak of 148%) and its volatility has been above its historical average for the most part of 1H 2025. However, COIN’s volatility has recently declined substantially to the current level of 62.26% (in terms of 30-day rolling volatility), not only a far cry from the peak levels but also significantly below its historical average of 85.84%. Looking ahead, I see a couple of reasons that could cause COIN stock’s volatility to remain below its historical average over the next year. The top reasons on my list include the increased regulatory clarity and the maturation of COIN’s cryptocurrency-related operation. Historically, periods of regulatory uncertainty have created investor panic, leading to extreme price swings as reflected in COIN’s extreme volatility shown in the chart. However, recent developments should improve the regulatory environment considerably in my view. Some key developments include the establishment of a strategic Bitcoin reserve and the advancement of legislation in Congress. Furthermore, as a byproduct of the regulatory clarity, I also expect the cryptocurrency market continues to mature and institutional adoption continue to expand. I further anticipate these developments to directly translate to lower volatility for a company like COIN, whose business model is intrinsically linked to crypto trading volume and crypto price fluctuations. Seeking Alpha Other risks and final thoughts A couple of additional risks, both in the upside and downside directions, are worth mentioning. All covered-called funds (and CONY is no exception) entail a common set of generic risks. Writing covered call options generates a fixed income upfront but limits the upside potential if the price of the underlying asset (COIN stock prices in this case) appreciates. As a result, the total return of the fund could lag the underlying asset severely, which is the case of CONY thus far as you can tell from the data in the chart below. Since the fund’s inception, COIN experienced a price gain of 291% while CONY suffered a loss of 63% as aforementioned. Even with the generous premium CONY has generated, the gap is still quite large as seen in the bottom panel. In terms of total return, COIN delivered a remarkable return of 305%, compared to CONY's return of 131%. Of course, in the upside direction, CONY’s option overlay can help cushion the downside in the case of a price pullback in COIN stock. The premium income could offset some of the price declines. However, given my above outlook, I expect CONY’s income generation to be less potent going forward, and I see a secular tailwind for COIN going forward. To recap, the focus of this analysis is to examine the current exposure of CONY and its income generation potential. I am impressed by the fund’s ability to generate sizable total return thus far. I continue to expect solid total return potential ahead as I expect crypto to exhibit higher volatility compared to traditional assets (again, such as bonds and equity). However, I don’t expect its past performance to continue with the regulatory clarity that has emerged recently. Seeking Alpha

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