Crypto structured products offer investors a new opportunity to limit their risk exposure without impeding the potential gain, says Jeff Zhao, Co-founder of darwinbit.
The world of cryptocurrency has steadily become an integral part of the mainstream financial landscape, providing institutional and retail investors with increasing opportunities for diversification and risk management. This is particularly the case in Southeast Asia, a region that is currently leading the world in mainstream cryptocurrency adoption and growth, with countries such as Singapore, Vietnam, and the Philippines hosting some of the largest populations of active cryptocurrency owners in the world.
As adoption grows, crypto markets have experienced increasing complexity, institutional participation and emphasis on compliance and risk management. Together, these trends have created a fertile ground for the burgeoning growth of crypto structured products in the region, serving crypto investors who are looking for more sophisticated tools to manage risk, diversify their portfolios, and achieve their financial goals.
Like their traditional counterparts, structured products provide investors with ways to manage risk and unlock growth in volatile markets. But unlike traditional financial markets, the crypto market is highly accessible, with lower barriers to entry, higher potential for growth and fewer middlemen in the mix. As a result, crypto structured products are poised to generate significant opportunities for crypto investors while being a safer investment option.
Understanding crypto structured products
Structured products have a rich historical background originating in the 1990s, becoming increasingly popular among retail investors due to their potential to provide personalised risk-return profiles. These products serve as financial instruments that consolidate investment strategies through derivatives linked to an underlying asset, enabling investors to customize the product to match their specific risk appetite, investment objectives, or market perspectives.
For Asia, traditional structured products still account for only 4% – 5% of overall wealth investments, and the TradFi industry sees this as a potential boon in the coming years. Now, the sphere of digital assets has adopted this practice and customized it to its relevant context, which involves deriving their worth from a cryptocurrency, such as Bitcoin or Ethereum, and integrating an array of crypto assets and derivatives to construct the final offering. These products have the following features:
- Customizable: Crypto structured products can be tailored to meet specific investment goals while limiting the downside risks.
- Amplified returns: Structured products permit investors to magnify their potential gains and capitalize on market upswings.
- Reduced risks: These meticulously crafted products are engineered to shield a portion or the entirety of the investment from potential market downturns, essentially having an integrated hedging component within the product.
Setting Foot In Crypto Structured Products With Darwinbit
Considering the historical volatility of the cryptocurrency market, getting the mechanics right plays an even more pivotal role as it provides investors with a more predictable outcome.
For instance, the Shark Fin — a popular wealth accumulation product available among top crypto exchanges such as KuCoin, which is powered by darwinbit, offers a guaranteed principal and ROI at maturity regardless of the swings of the market. Additionally, if the expiration price falls within the predetermined range, there will be a higher rate of return for the end user.
Investors can take a step further with other wealth-accumulation- focused products, such as the Snowball and Dual Investment, with the full breakdown on crypto structured products featured on darwinbit.
Jeff Zhao is the co-founder and COO of Darwinbit, a digital asset management firm that aims to bridge traditional and modern finance by leveraging the expertise of traditional finance and combining it with the efficiency of the internet age to offer safer, more flexible, and transparent products. Zhao specializes in crypto asset management with a focus on structured products, staking, and fixed