By Francis Lew, CEO
As the adoption of cryptocurrencies continues to rise, investors are increasingly looking for ways to add such exposure to their existing portfolios.
There are numerous ways to achieve this.
One such strategy gaining traction is a structured dual investment, which allows investors to receive yields while having an opportunity to potentially acquire cryptocurrencies at their preferred price.
In this post, we will delve into the concept of a structured dual investment and explore the benefits it offers.
Structured Dual Investment Simplified
Structured dual investment can be applied to a multitude of assets, including fiat (currencies), equities, and cryptocurrencies. They can go by many different labels: Dual Currency Investment, Dual Currency Deposit, Equity Linked Note, etc.
In the crypto sphere, such structured investments usually involve allocating a portion of your cryptocurrency portfolio into a contract to receive yields at the end of a definitive tenure with a convertibility element at pre-defined levels typically known as a “strike price”.
There are many other similar terms used: “exercise price”, “conversion price”, etc, rest assured they all refer to the same thing.
If in doubt, do pour through the instrument’s fact sheet or term sheet.
Without delving too much into the technical aspect of the product, these structures are typically packaged as curated derivatives and seek to make the volatilities of the underlying assets go to work for investors typically by translating such volatilities into a superior yield.
All the nitty-gritty aspects involved in these structures are usually encompassed within the product design so that investors can semi-passively reap the benefits.
Why semi-passive? A certain element of engagement is still required on the part of the investor in terms of deciding the amount to invest and choosing the tenure and strike price. This may not even be a consideration as it is investment vehicle dependent.
Benefits of a Structured Dual Investment
Return Maximisation: Regardless of the intent, subscription in a structured dual investment will generate a yield on the principal invested or on the conditional conversion.
A diligent investor will see that this proposition of not sitting on idle assets is an attractive one.
Market “timing”: The convertibility feature of a structured dual investment can be an excellent tool used to “time” the buy/sell levels of the underlying assets, especially when it comes to portfolio rebalancing or achieving intended exposure to the other underlying asset.
Naturally, the strike prices picked matter greatly in the tenure sought. Additionally, as convertibility is a product feature, there should be no more transactional fees to speak of and the return-maximising feature just adds to its attractiveness.
When you compare this to the need to actively monitor spot market levels with orders placed or alerts, the choice gets clearer.
Hedging: Hedging may manifest as a requirement or a personal choice. Whatever the intent is, a structured dual investment is the most cost-effective way to achieve this purpose.
Indeed, there are other alternatives to pursue, but these usually have a cost associated with them. Contrast this with a structured dual investment that pays the investor for a similar outcome!
Income Generation: In range-bound markets, such structured dual investments will be well suited to generate an income stream from the yields received.
Intuitively, this scenario will make sense to an astute investor who is agnostic of the underlying assets.
At Nodeam, we have structured a dual investment series that enables yields in any market sentiment.
The Nodeam High Yield Dual Investment (HYDI) is such. HYDI not only offers investors a high annualised percentage yield, but it also simultaneously provides the opportunity to convert to and from Bitcoin (BTC) and Ethereum (ETH) at a better than current market price.
By applying the outcomes of HYDI, investors can manage the exposures of their cryptocurrency portfolios, enhance total returns, and preserve capital even during market downturns.
For example, higher allocations to BTC and ETH in upward-trending markets and overweight stable coins (USDC and USDT) in downturns.
As with any investment, it is essential to thoroughly research and understand the risks and opportunities associated with any investment product and cryptocurrencies.
It is strongly suggested that you consult with a relevant financial advisor, or tax professional before embarking on your investment journey.