Crypto asset management returns are declining, and quantitative strategies are facing challenges
The current crypto asset management market is experiencing a significant decline in returns, and signs of asset shortage are prominent. The returns of many previously stable arbitrage strategies have been greatly narrowed: for example, the annualized return of risk-free arbitrage based on Bitcoin has dropped to less than 2%, and the annualized return of arbitrage strategies based on stablecoins has also fallen below 6% to 8%. The currency-based financial management interest rates of mainstream trading platforms are almost at a historical low - for example, the annualized return of BTC current deposits on OKX is only about 0.5%, and even if the assets are locked for 30 days, the highest BTC annualized return provided by Binance is only 1%. At the same time, the current deposit interest rates of stablecoins such as USDT generally fell below 2%, far lower than the previous double-digit levels. Overall, it has become a consensus that low-risk interest rate products in the field of Crypto asset management have downward returns.
Quantitative hedging strategies are also under pressure. Strategies such as long-short hedging and CTA have experienced pullbacks in recent market conditions, and the net value of many quantitative funds has declined. In extreme market conditions, some strategy teams have even encountered black swan events: since 2017, the crypto market has experienced many extreme fluctuations. About 80% of quantitative trading teams have failed to properly deal with risks due to insufficient risk control, and eventually suffered major losses or even exited the market. In the latest round of bear market, events such as the collapse of LUNA in May 2022 and the FTX explosion have occurred one after another, causing a sharp drop in the price of crypto assets. These unexpected shocks caught many trading teams off guard and greatly increased the difficulty of fund management. After experiencing a series of risk events, quantitative institutions have more stringent requirements for fund risk control, but it is increasingly difficult to obtain excess returns in a low-volatility market environment, and managers are faced with a situation where they are in a dilemma.
Whats more serious is that the market volatility continues to decline, exacerbating the feeling of asset shortage. Asset shortage generally refers to the situation where low-risk, high-yield assets are scarce in the market and funds have nowhere to find returns. Bitcoins price volatility has dropped significantly: at the peak of the bull market in 2021, BTCs annualized volatility once exceeded 100%, while since 2023, the volatility has remained below 50% for a long time. In March 2025, even when the price hit a stage high, the volatility was only about 40%. This unprecedented low volatility makes it difficult for strategies that rely on drastic market fluctuations to make profits, while traditional sources of income (such as perpetual contract funding rates and spot-futures spreads) have shrunk significantly. Trading volume has also continued to decline, with Bitcoins weekend trading volume falling to a historical low of 16%, and the market is light. When high-yield assets are hard to find and idle funds are abundant in the market, investors feel that there is no money to allocate - this is a true portrayal of the current Crypto market.
Investors take a different approach: structured products offer robust coupons
In the general environment of declining yields, more and more investors are turning their attention to structured products, seeking new and stable ways to earn income. Through sophisticated risk stratification and structural design, structured products can provide relatively stable coupon income under different market conditions to make up for the insufficient income of traditional quantitative strategies. For example, many structured notes can still provide fixed coupons as agreed when the market fluctuates or oscillates mildly, and even achieve positive returns in a slightly falling market. This type of income certificate with a fixed coupon is essentially embedded in derivative transactions, sacrificing some extreme market returns in exchange for stable returns and certain downside protection in high-probability scenarios. For crypto investors who are currently eager to obtain quasi-fixed income returns, structured products provide a compromise path: without being fully exposed to the drastic fluctuations in the price of coins, they can also obtain returns significantly higher than the risk-free rate.
Compared with traditional quantitative hedging strategies, the advantage of structured products is that the return is more certain. Traditional strategies rely on traders to choose the timing and trend to obtain excess returns, and the results are often greatly affected by market fluctuations. Structured products pre-set the return conditions and risk boundaries, and lock in coupon income by selling options and collecting premiums, so that the income mainly comes from the accumulation of coupons held to maturity, rather than trading profits and losses. For example, the classic snowball structure product, under the premise that the underlying assets do not fall sharply, investors can regularly obtain considerable interest income, even if the market is sideways or fluctuates slightly. This selling volatility for income model makes the cash flow of the investment portfolio more stable. Another example is a fixed income note (FCN). By investing part of the funds in fixed income assets and part of the funds in put options, investors can get fixed interest regularly, and only bear limited risks when the underlying assets fall sharply. These structural designs effectively transform the originally unpredictable market fluctuations into more predictable coupon returns, which are very attractive to funds pursuing stable returns.
Based on this advantage, structured derivatives have begun to emerge in the Crypto market in recent years. As an industry-leading one-stop crypto financial service platform, Matrixport has taken the lead in laying out and launching a diversified structured product line, providing investors with a wealth of stable income tools. At present, the structured products launched by Matrixport include: Accumulator for cumulative buying, Decumulator for cumulative selling, Snowball for interval knock-out, fixed-rate notes (FCN) with fixed coupons, dual-currency investment for daily settlement (daily dual-currency financial management), and zero-interest lending through option hedging. These products have their own characteristics - Accumulator allows investors to buy the underlying assets at a discount price regularly in a volatile market to achieve fixed investment position building; Decumulator helps large investors gradually reduce their holdings at high levels, and lock in profits by selling in batches at a preset execution price. It is known as a smart choice for miners and long-term coin holders to cash out in the bull market; products such as Snowball and Shark Fin provide additional income or protection for different market conditions. By incorporating the above products into asset allocation, investors can choose different strategies based on their own judgment of market trends, and enhance returns while controlling risks. As JPMorgan Private Banks analysis points out, in an environment of rising market risks, the use of structured products can enhance the resilience of the portfolio, improve the risk-adjusted return potential, and provide a buffer for possible future volatility.
It is worth noting that although these structured solutions are complex in design, the user experience is becoming more and more friendly. For example, Matrixport has optimized the mechanism of traditional cumulative options for crypto investors, introduced functions such as daily observation and weekly settlement, and provided flexible parameter adjustments and professional guidance, so that ordinary users can also participate conveniently. Currently, investors only need to use customized services to simply operate to customize structured financial management plans that meet their expectations. The popularization of this professional tool has greatly lowered the threshold for high-level strategies. In general, after the Crypto market entered the new normal of low volatility and low returns, structured products are gaining favor with more and more institutional investors and high-net-worth clients due to their stable coupons, flexible customization, and controllable risks.
Traditional experience: How Snowball and Autocall dominate the low-volatility market
Structured products are not a new thing unique to the crypto industry. Their development history in the traditional financial market provides a useful reference for the current Crypto industry. As early as around 2000, derivative products similar to the snowball structure had been widely used overseas, designed by investment banks and sold to customers through private banks and asset management institutions. These products quickly became popular in the low-interest, low-volatility macro environment and became one of the mainstream tools for investors to obtain stable returns. For example, in the long-term low-interest era after the 2008 financial crisis, a large number of Autocallable notes (including snowball structures, interval accumulation, etc.) linked to stock indexes emerged in the European, American and Asian markets. Due to the extremely low interest rates of traditional deposits and bonds, investors have to turn to these coupon-bearing structured products to thicken their returns. According to statistics, ten years ago, autocall only accounted for about 10% of the structured note market, but now its share has climbed to 40% to 50% of the global market, becoming half of the structured investment field. This is particularly evident in Europe, where retail structured products in developed markets such as the UK are almost dominated by Auto-Call structures, and most products linked to indexes such as the FTSE 100 and EuroStoxx 50 use designs with triggered redemption and coupons. This fully demonstrates that in a period of low interest rates and reduced asset volatility, structured derivatives can meet investors special preferences for returns and risks, thus achieving a transformation from marginal tools to mainstream configurations.
The Asian market has also witnessed the explosive growth of structured products. Taking Hong Kong, Singapore and other wealth management centers as an example, as early as the mid-2000s, local private banks launched a large number of structures such as Accumulator (accumulation options), allowing high-net-worth clients to make profits by purchasing stocks in bulk during volatile markets. However, experience has also shown that structured products need to match investors risk tolerance, and blind participation may lead to losses. But then the industry made improvements to risk control, added knock-out mechanisms and loss caps, and regained market trust. In the environment of low volatility + low interest rates, products such as Snowball and interval accumulation made a comeback in Asia in the mid-to-late 2010s and gained a foothold.
Structured wealth management in mainland China started later but has developed rapidly. In 2017, Chinese securities firms created the first batch of snowball products in China. Although the issuance slowed down due to losses suffered by customers in the bear market in the early stage, the market warmed up after 2020 and investors demand for absolute returns increased, and snowball wealth management ushered in explosive growth. According to data from Nancai Wealth Management, by the end of 2022, there were 69 snowball structure products in the wealth management market that included derivatives, accounting for as high as 75%, becoming the largest structure type of wealth management containing derivatives (this proportion has increased significantly compared with the previous few years. Some studies have shown that if the deformed structure is added, the proportion of snowball products actually exceeds 85%). Similarly, on the private wealth side of banks, the coupon-enhanced structure of fixed income and options is becoming more and more popular, and its typical representatives are Fixed Coupon Note and various Autocall structures. Even in the market transition period from bull to bear, this type of Autocall structure still firmly occupies more than 40% of the issuance of structured products. For example, in 2022, European and American stock markets fluctuated and pulled back, but the sales of Autocallable notes linked to stock indexes issued by major investment banks did not cool down, and the proportion of such products in many conservative investment portfolios still exceeded 40%. This shows that regardless of bull or bear markets, structured products have a stable demand base under appropriate scenarios.
The reason is that the development experience of traditional finance shows that when the market enters the stage of low volatility and low returns, structured products often leap from niche derivatives to mass investment products. Snowball of Hong Kong private banks in the mid-2000s and Snowball/index enhancement products of mainland bank wealth management in the late 2010s all ushered in a blowout against the background of stock market fluctuations and falling interest rates. Through the clever design of derivative structures, they provide investors with a return/risk combination that is difficult to achieve with conventional assets: they can obtain coupons higher than the market average and have a certain buffer against declines. This is exactly in line with the core demands of investors during the asset shortage period. Therefore, whether it is mature markets in Europe and the United States or emerging markets in Asia, structured products have repeatedly proved their vitality with facts. In the current environment of the Crypto market, which has many similarities with the above scenarios, these cases in the traditional market undoubtedly show us a possible path: when the risk-free interest rate is too low and market volatility is suppressed, structured products often come to the fore from behind the scenes and become one of the mainstream choices for investors to obtain stable returns.
Trend Outlook: Structured Products Become a New Source of Income in the “Asset Shortage” Era
In general, the Crypto asset management industry is in a special period of scarce returns and unpredictable risks. The dilemma of asset shortage is driving the market to accelerate change. Against this backdrop, structured products are expected to play an increasingly important role and become a new income engine for the crypto market. On the one hand, structured products can lock in medium-to-high fixed returns for investors while strictly controlling extreme risks through pre-designed risk mitigation mechanisms (such as knock-out and knock-in conditions, tiered compensation, etc.). This art of balancing risk/return is particularly suitable for current investor preferences - everyone wants to obtain returns higher than inflation and risk-free interest rates, but also has lingering fears about market fluctuations. In the case of frequent failures of quantitative strategies and low spot holding returns, structured notes provide a compromise: use derivatives to hedge market uncertainties and use coupon income to fill asset shortages. As industry insiders point out, in the context of long-term low interest rates, many investors can no longer obtain satisfactory returns from government bonds and high-rated bonds, so they have to turn to more complex products to obtain the required coupons. This trend is now also beginning to play out in the crypto field.
On the other hand, the flexibility and customization advantages of structured products will attract more institutional funds and high-net-worth clients to join this field. Compared with the stereotyped traditional financial management, structured solutions can be tailored according to investors risk preferences and market judgment. For example, if you are optimistic about the long-term rise of a mainstream currency but are worried about short-term fluctuations, investors can choose Snowball or Shark Fin products with downside protection, step on the accelerator and fasten your seat belts at the same time. For example, miners, who hold a large amount of spot, can lock in profits in batches through Decumulator at the peak of the bull market without worrying about a one-time sell-off that will impact the market. The diversity of products enables it to meet both offensive needs and defensive strategies, which is exactly what institutional portfolio optimization needs. With the increasing attention paid to risk-controlled sources of income by institutions such as family offices and crypto hedge funds in recent years, structured products meet their requirements for building all-weather strategies. In the traditional market, large asset management institutions have long used structured notes as one of the standard portfolios; it can be foreseen that similar situations will gradually emerge in Crypto institutional configurations. In particular, as the global regulatory environment becomes clearer and the supply of compliant structured products increases, institutional investors are increasingly interested in such products. Many crypto hedge fund managers expect to increase the proportion of structured transactions in the coming years to enhance the return stability and risk resistance of their investment portfolios.
In summary, structured products are expected to become an important source of income in the era of crypto asset shortage. For investors seeking steady value-added, it provides a new path to balance income and risk control: through innovative financial engineering means, lock in relatively certain returns in an uncertain market. Of course, structured products themselves are not without risks. Behind them are issues such as counterparty credit, liquidity, and possible loss of income under extreme market conditions. Investors still need to fully understand the product terms and measure their own risk tolerance. However, from historical experience and current trends, as product design becomes more mature and transparent, the advantages of structured products will become more prominent. It can be foreseen that structured products will occupy a place in the future crypto asset management landscape: both institutions and high-net-worth individuals will leave more room for them in asset allocation. When the era of lying down to make money is gone, making good use of structured tools to obtain stable coupons will become a new investment wisdom. The Crypto market is entering a stage of more rational and refined operation, and the rise of structured products is one of the highlights worth paying attention to in this evolution. As market participants deepen their understanding and the regulatory framework gradually improves, structured products are expected to replicate their success story in traditional finance in the crypto field and continue to create value of steady profit for investors.
Finally, the current trend can be summarized as follows: low volatility and asset shortages are not terrible, what is terrible is sticking to the old ways. The rise of structured products is helping investors open their minds and rediscover sources of income under the premise of controllable risks. On the journey of Cryptos mature development, such products will continue to inject new vitality into the market and become a bridge connecting traditional financial wisdom and crypto innovation practices. Facing the future, crypto investors may wish to embrace structured thinking and seek simple and reliable returns in a complex market environment. As practice has shown, when the market gives challenges, financial innovation will eventually give answers. Structured products may be the key to breaking the deadlock in the current era of crypto asset shortage.
