Crypto Structured Products: Maximizing Yields During Choppy Markets

The crypto market is notorious for its volatility, exemplified by the tumultuous events of 2022 when Bitcoin plummeted to a historic low of around $17,000 during one of the most catastrophic crypto crashes in its history.Yet, by the start of 2024, Bitcoin experienced a tremendous rally, shattering records with a new all-time high of over $73,730 by mid-March of 2024. 

In light of these dramatic fluctuations, countless retail and institutional investors are seeking ways to maximize their holdings while taking advantage of volatility. Trading volumes for crypto derivatives are on the rise, and the use of futures, options and perpetual swaps to hedge against tail risk events is becoming increasingly popular.

However, crypto derivatives trading can be incredibly complex, and novice investors are turning toward ready-made solutions and/or structured products to participate in this space.

This article examines crypto structured products and why they’re becoming popular with retail and institutional investors.

Key Takeaways:

• The crypto market's extreme volatility, evidenced by events such as the 2022 crash and subsequent record-breaking rally in early 2024, underscores the need for crypto-structured products designed to hedge against volatility.

• Bybit Structured Products offer investors the opportunity to navigate the unpredictable crypto market with ease, offering tailored flexibility to help each customer achieve their investment goals.

• Structured Products such as Dual Asset, Double-Win, Discount Buy and Smart Leverage provide investors with a range of strategies to secure greater profits.

What Are Crypto Structured Products?

Crypto structured products are packaged investments linked to digital assets to enhance risk-return metrics for investors. These financial derivatives (financial products deriving value from underlying digital assets, such as BTC, ETH and USDT) are customizable and often designed to hedge against volatility while improving yields and securing principal for investors.

Traditionally, structured products have provided retail investors with easy access to derivatives that would have otherwise been out of their reach and helped them achieve their risk-return objectives. 

Investment banks typically offer structured products to their wealth-management clients for customized returns in financial markets. They can also be sold to the retail mass market.

A structured product often looks like a traditional security with a payment profile, similar to a bond or certificate of deposit, but with cash flows linked to the performance of other underlying assets. Banks use them as a way to manage the volatility of assets they own.

Crypto structured products have been launching since the first quarter of 2021. Various structured products are hoping to capitalize on the increasing awareness and opportunities to sustain yield in a highly volatile crypto environment.

What Makes Crypto Structured Products Worth Trying?

Crypto structured products have the distinct advantage of allowing investors to earn profits at rates higher than those of other products, while simultaneously protecting their capital. Unlike other financial products, your initial capital is guaranteed no matter the market's direction. All you may lose is your potential gains.

With crypto structured products, HODLers and investors can access previously out-of-reach assets and hedge their positions while profiting in bullish and bearish markets. It’s worth noting that the underlying mix of assets can be tailored to suit any investor's particular needs, risk profile and expectations.

Pros and Cons of Crypto Structured Products

Crypto structured products offer a prepackaged collection of crypto derivatives in a format more accessible to newbies. However, there's a cap on what you can earn. To help you decide if it's the right investment product for you, here are the advantages of crypto-structured products as well as their drawbacks.

Pros

• Allow you to profit from both bullish and bearish products, regardless of the market sentiment

• Enhance volatility risk management

• Are similar to bonds but with shorter lock-in periods (varies by product)

• Can be customized to fit your personal investing goals and risk appetite

• Offer exposure to cryptocurrency market without the need to directly purchase and store digital assets

• May be regulated in many jurisdictions

• Have built-in mechanisms to limit losses (varies by product)

Cons

• Principal capital isn’t protected

• Can seem complicated for newer investors

• May charge additional fees for some products

• Can be more expensive than other securities due to higher costs of developing and launching

Bybit Structured Products

Given the increasing awareness of the benefits of crypto structured products in the volatile crypto market, crypto structured products are becoming increasingly popular. Weighing the pros and cons before investing is extremely important. 

Bybit offers four Structured Products that work well in different markets: Dual Asset, Double-Win, Discount Buy and Smart Leverage. Note that all four of these products are non-principal-protected. Hence, if the market doesn’t perform in your favor, you risk losing some or even all of your original investment.

Bybit Dual Asset

Bybit Dual Asset is a speculation tool that helps you capitalize on tiny price movements in the market within a short time span to earn up to 500% APR. It works during both bear markets and bull markets, and offers higher APR with earlier deposits. 

With Dual Asset, you need to subscribe (deposit) your assets in order to predict the price direction of your selected crypto asset within a fixed time frame. Once your assets are subscribed, they’re locked and cannot be redeemed until the settlement date. While the returns may be guaranteed upon maturity, during times of adverse market movement your returns may be less than your subscribed asset(s).

You can choose to either buy low or sell high. With the former, you invest USDT and select a Target Price lower than the current price, and with the latter, you invest BTC and pick a Target Price higher than the current price. During the settlement date, you’ll receive returns either in USDT or your chosen cryptocurrency, based on the outcome of your trade.

Higher APR Brings Higher Returns

Dual Asset brings higher returns than if you were to trade normally, thanks to the high APR you receive. For instance, if you were to buy low at $20,000, upon maturity, if theSettlement Price is ≤ the Target Price, you’ll successfully purchase the target crypto at your desired price with your subscribed USDT and earn an interest income. Even if the Settlement Price exceeds the Target Price and you fail to purchase the target crypto, you’ll still receive your subscription amount and interest income in USDT.

Bybit Dual Asset Upgrade

Dual Asset’s recent upgrade to its 2.0 version features greater flexibility, with up to 25 supported crypto assets, including BTC, ETH, DOGE, SOL and AVAX. It also includes an Auto Reinvest component to help you automatically resubscribe to a Dual Asset Plan with the same settings, based on your last successful subscription.

Double-Win

Double-Win is another speculative vehicle that helps you hedge against market volatility and profit from significant price movements that exceed a predetermined range. If the Settlement Price falls within the range during expiration, however, you won't gain any returns. 

Double-Win is tailored for the unpredictable market of the crypto industry, and encompasses advantages such as rapid turnaround time, allowing traders to swiftly capitalize on dynamic market movements and amplified potential returns with its leverage of up to 500x. This high leverage supports the potential for greater returns, which means that it also comes with the risk of losing the entire investment amount. Therefore, it’s paramount that investors interested in Double-Win are fully aware of the mechanics behind this tool as well as its associated risks.

Discount Buy

Discount Buy is a non-principal-protected product suitable for investors looking to acquire BTC or ETH at a discount in bear markets or during low-volatility periods. There are two optimal scenarios for Discount Buy: Knockout Scenario and Buy Scenario.

The Knockout Scenario is when the Settlement Price is higher than the Knockout Price, allowing you to receive your principal investment plus an additional APR in USDT. For the Buy Scenario, if the Settlement Price is lower than the Knockout Price but higher than the Purchase Price, you can buy your desired crypto at the Purchase Price. However, if the Settlement Price is ≤ the Purchase Price, then buying the crypto will no longer be profitable. 

Smart Leverage

Smart Leverage is a flexible tool that can help you reap greater profits during times of high volatility. You can choose to long or short selected crypto tokens (BTC, ETH, BNB and SOL) with up to 200x leverage, without any liquidation risks before the settlement date. Smart Leverage also allows you to redeem and secure your profits anytime prior to expiration.

If you choose to go long, and the Settlement Price is ≥ the Breakeven Price, you’ll receive both your principal amount and the profits gained through leverage. However, if the Settlement Price is less than the Breakeven Price, you’ll incur losses, with the worst-case scenario being the loss of your entire investment. Conversely, for short positions, if the Settlement Price is ≤ the Breakeven Price, you’ll receive both your principal amount and the profits attained through leverage. 

If the Settlement Price exceeds the Breakeven Price, you’ll face losses, possibly even losing your full investment.

Since the use of leverage can amplify both gains and losses, it’s crucial that you fully understand the mechanics of Smart Leverage before using it.

The Bottom Line

Crypto structured products offer custom-made solutions designed to enhance risk-return benefits for both retail and institutional investors in the volatile crypto market. Bybit Structured Products — Dual Asset, Double-Win, Discount Buy and Smart Leverage — provide various strategies that help investors potentially earn higher returns, empowering investors to smoothly navigate market fluctuations and execute complex derivative strategies previously out of reach. This advantageous service offers a sophisticated approach to managing and profiting from crypto investments.

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