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Bybit Learn
Intermediate
Jul 27, 2022

Crypto Structured Products: Maximizing Yields During Choppy Markets

With current crypto markets in a slump, 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 derivative trading can be incredibly complex, and novice investors are turning toward ready-made solutions 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.

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:

  • Protect your principal capital

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

  • Grant you access to fully taxable investments at higher tax efficiency

  • Enhance volatility risk management

  • Are similar to bonds but with shorter lock-in periods

  • 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

Cons:

  • Caps your maximum gains

  • 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's Shark Fin Structured Product 

Given increasing awareness of the benefits of crypto structured products amid a crypto winter, crypto structured products are becoming increasingly popular. Weighing the pros and cons before investing is extremely important. Of the launched products, Bybit’s Shark Fin Structured Product stands out with unique features.

Designed to allow you to benefit from the volatility of your select crypto assets, Bybit Shark Fin is a short-term principal-guaranteed structured product that lets you earn excellent yields when you deposit stablecoins such as USDT and USDC. A principal guarantee means that you don’t lose the original capital invested. Investors earn a return with relatively low risk.

Your Initial Investment Is Protected

The Bybit Shark Fin structured product ensures that your capital is protected. Your initial investment isn’t at risk, no matter what happens in the cryptocurrency markets. The final return is linked to the underlying asset.

No Fees

You pay no fees to invest in Bybit Shark Fin. A minimum investment of 100 USDT or 100 USDC is all it takes to access these yielding investments. There is no upper limit to the amount that you can invest, though this is capped when the subscription amount is reached.

Returns on Investment

With short-term investment periods, you won’t have long to wait until you reap rewards. You have three short-term periods to choose from: 7, 14 and 21 days. Bybit releases weekly product plans.

Two Options

Bybit investors can choose from one of two Bybit products — Bullish Shark Fin and Bearish Shark Fin. With a Bullish Shark Fin product, the higher the underlying settlement amount within the limits of the predetermined prices, the higher the yield. If you have a Bearish Shark Fin product, you’ll earn a higher yield at the lowest settlement price within the range.

Let’s take a closer look:

When you buy a Bullish Shark Fin product, you'll have preset parameters that include price range, APR range and subscription period (7, 14 or 21 days). At the end of the subscription period, you'll earn the maximum yield if the underlying asset price is within the preset price range. Note that the higher the settlement price is within the preset price range, the higher the final yield.

You’ll still profit if the settlement price of the underlying asset equals or exceeds the preset price range at the end of the subscription period. In that case, the enhanced APR is used to calculate the yield. This will be lower than when the asset's price remains within range. 

Suppose the ultimate price of the underlying assets falls below the preset price range. Then the yield is determined using the guaranteed minimum APR, resulting in a lower gain than that obtainable in the two earlier scenarios.

Here are two examples:

Example 1: Bullish Shark Fin 

Trader A buys a Bullish Shark Fin product. The product parameters are as follows:

Price Range: $44,000 – $48,000

Enhanced APR: 8%

Subscription Period: 7 days

Principal: 1,000 USDT

BTC Price

Yield Earned

APR

Type

< $44,000

Guaranteed minimum yield

2%

Below price range

$44,000 – $48,000

Maximum yield

18%

Within price range

> $48,000

Enhanced yield

8%

Above price range

On the settlement day, the price of BTC is $47,000 and the calculation of interest is based on the following formula:

  • APR = Guaranteed Minimum APR + (Settlement Price − Lower Price Range)/(Upper Price Range − Lower Price Range) × (Maximum APR − Guaranteed Minimum APR) = 2% + (47,000 − 44,000)/(48,000 − 44,000) × (18% − 2%) = 14%

  • Interest Earned = Principal × APR × Subscription Period/365 = $1000  × 14% × 7/365 ⋍ 2.685 USDT

  • bullish shark fin

Example 2: Bearish Shark Fin 

For the Bearish Shark Fin product, you'll earn a higher yield when the final price of the underlying assets falls within the preset range. But unlike the Bullish Shark Fin product, the lower the settlement price while remaining within range, the higher the final yield.

When the price of your asset is below the preset range on settlement day, your yield will be calculated based on the enhanced yield, which is lower than when the price falls within the range.

Finally, if the price exceeds the present price band, the guaranteed minimum APR will be used, generating the lowest yield.

Trader B buys a Bearish Shark Fin product. The product parameters are as follows:

Price Range: $44,000 – $48,000

APR Range: 2% – 18%

Enhanced APR: 8%

Subscription Period: 7 days

Principal: 1,000 USDT

BTC Price

Yield Earned

APR

Type

> $48,000

Guaranteed minimum yield

2%

Above price range

$44,000 – $48,000

Maximum yield

18%

Within price range

< $44,000

Enhanced yield

8%

Below price range

On the settlement day, the price of BTC is $45,000, and the calculation of interest is based on the following formula:

  • APR = Guaranteed Minimum APR + (Upper Price Range − Settlement Price)/(Upper Price Range − Lower Price Range) × (Maximum APR − Guaranteed Minimum APR) = 2% + (48,000 − 45,000)/(48,000 − 44,000) × (18% − 2%) = 14%

  • Interest Earned = Principal × APR × Subscription Period/365 = $1000  × 14% × 7/365 ⋍ 2.685 USDT

  • bearish shark fin

The Bottom Line

Crypto structured products consist of derivatives, securities and interest-bearing assets. They are structured to help small investors attain specific risk-return benefits using bespoke solutions.

With Bybit Shark Fin Solutions, individual investors also gain easy access to typically complicated derivatives, combined into an easily manageable instrument. Crypto structured products allow you to earn yield regardless of the market’s moves, complete with principal protection.

Ultimately, Bybit's Shark Fin is unique because it offers investors a high yield in turbulent markets. Here's a handy infographic that summarizes all you need to know about our Shark Fin product.

Curious about the full details of Bybit's Shark Fin product? After signing up on Bybit, check out our structured product offerings for more ways on how you can grow your crypto holdings.