- Will Crypto Winter Last Forever?
- Switching to Snowball During Crypto Winter?
- Why Snowball is an Ideal Choice in this market
- Who Should Invest Through Snowball?
- Which Assets are currently available as underlying?
- Is There Probability of a Loss?
- When Does an Investor Receive Payments?
- To Conclude
Volatility is the first thing that comes to mind of everyone when somebody mentions the word “Cryptocurrency”. However it is no secret that many fortunes have been made through cryptocurrency investments. Cryptocurrency is defined as digital currency in which investments are verified and records are maintained by a decentralized ledger using the cryptography technique, cryptocurrencies are devoid of a centralized monitoring structure.
Investments in cryptocurrency have also been considered speculative due to the frequent fluctuations seen in the prices of the same. Cryptocurrencies that were booming a couple of years ago have seemingly collapsed in the recent past.
On 13th June 2022, there was a bloodbath in the crypto market, and was soon proclaimed a bloody Monday by crypto traders. Why?
Bitcoin and Ethereum were down by 20% that weekend. The fall was 70% cumulatively by the first half of 2022. Was this expected? Maybe! Was it scary? Indeed, yes!
It was scary for both the traditional crypto traders as well as the newbies. After all, seeing your portfolio stumble down to more than 80% is a sight that one cannot behold. In fact, it's uncommon to see such high ebbs and flows in the crypto market too. But it is what it is.
Bitcoin, arguably the most popularly known cryptocurrency, saw its price soar from a low of $5,000 in March 2020 to more than $60,000 a year later. Ethereum, another popular cryptocurrency, had an even more impressive climb, as it rose from just $120 to a high of almost $5,000 in 2021. However, the currencies failed to maintain their momentum and underwent severe corrections in the days ahead.
Other currencies also called Altcoins suffered a similar fate with coins like Dogecoin, Aave, and Solana losing more than 50% value in a short span of time.
Some digital currencies and platforms completely failed completely. The likes of Terra Luna have collapsed by 99%. Terra Luna crypto first crashed from $120 to $0.02, a 99.9% correction. Of this, about 99% collapse was recorded within 48 hours on May 11 and 12. The crash continued a further 99%, followed by another 90% drop to reach $0.00000112 against BUSD (Binance USD).
Similarly, there was utmost chaos in the market when Celsius halted withdrawals from customers. This was a big crisis considering the fact that Celsius is a massive platform with 1.7 million customers and more than $20 billion worth of assets under management until last year.
Things took a bad turn due to the mismanagement of assets.To simplify it, Celsius gambled with the customer funds and ended up losing out. Then, as the entire market witnessed a dip, many people wanted to sell and withdraw their money. However, Celsius lacked the liquidity to pay back. Even Large Hedge funds like 3 Arrow which were over-leveraged collapsed under the contagion effect of liquidity shock, and price crashes due to multiple negative news.
Getting bombarded with such news would make any rational investor lose his mind. Maybe some crypto loyalists with nerves of steel can shirk off these bear markets but for the rest, it is a painful experience.
Before we get down to answering this question, it’s important to look at how the previous crypto winters have played out. The ongoing crypto winter officially began on 13th June 2022 according to digital asset fund manager Grayscale Investments.
While it should be noted that bitcoin had already fallen by over 60% on this day, Grayscale considered the rapid increase in the prices prior to the fall as it analyzed the blockchain to figure out the point where most crypto investors undertook losses from their purchase price.
To simplify it further, the previous major crypto cycles in 2012 and 2019 continued for an average of four years from peak to trough. If we were to account for past instances, there seems to be a long predictable winter ahead, considering the current crypto winter began only in June this year. It is a paradoxical situation for most investors as on the one hand people are looking to generate high returns but on the other hand, the crypto volatility makes them nervous. Investors want a product that can give them good returns with lower risk and want to avoid nuances like daily research, and tracking the market 24x7.
With these problems of investors in mind, a next-generation product has been created which can offer significant returns with much lower risk than direct ownership of crypto. Investors will no longer need to lose their sleep and time thinking and researching market movements. All these features come with no Management fees! This product is called Snowball, which is the first of its kind in the crypto world but a popular product in traditional markets.
Switching to Snowball during Crypto Winter?
In Finance the only free lunch is diversification. The goal of investing is not just to make the highest possible returns but also to minimize volatility and risks, hence it is ideal to create a portfolio of assets that have low correlation with others to avoid large drawdowns
Amid the ongoing crypto winter, it becomes extremely important to be more cautious than ever. During winter, it’s wise to exercise precaution, but the idea is not to give up crypto trading completely. However, in the current scenario when the probability of a downside or consolidation is much higher it would be unwise to go all in, which can potentially yield significant losses at worst, and no gains at best. A more pragmatic approach would be to invest in products that can offer above-market returns with a low correlation to the broader market. Such approach can not only provide high returns but preserve valuable capital which can be used at more attractive levels in case if market slides.
In fact savvy investors can make the most of this volatility by investing in products which can offer great returns even in unsteady markets. Snowball is one such product which can help investors achieve high coupon without worrying about intraday volatility and uncertainty of the market!
Snowball Explained -How it can help you ride the Volatility!
Snowball is a promising crypto product that has emerged as a potential suit during crypto winter that promises up to 30% APY on Bitcoin investments. The key aspect of this product is the potential for high yield at the cost of moderate risk. The product also promises up to 30% APY earning if the bitcoin does not fall by more than 35% at a time.
While the claims by Snowball may sound superficial initially, it has largely been trusted by investors so far. The product has already exceeded US$ 5 Million AUM in subscriptions in less than 3 months since its launch, while also recording good returns at the same time. An investor has an almost 95% probability of winning the coupon based on back-tested results.
Let’s understand the product first.
What is Snowball?
Snowball is a Derivative contract that has Knock-in and Knock-out characteristics. It comes under the category of Structured Products. In recent years, structured products have become one of the mainstream investment avenues for HNI’s and Ultra HNI’s with the total European structured product market accounting for over 500 Billion USD.
Snowball is very similar to the popular “autocallable” options. Retail investors might not be aware but autocall is one of the most sought-after derivative products among High-Net-worth individuals to generate enhanced yield in a volatile environment. Almost 67% of the total publicly issued Structured products in Europe had autocall or some other knock-out feature. The Auto callable payoff structure ranked number one for yet another year among future payoffs, according to 64% of the respondents that took part in the SRP European 2022 Awards Survey which is the most prestigious structured product market intelligence report.
Similar to an autocall, the snowball mostly has a long position in Calls along with a short position in Puts added with barrier features (Knock In and Knock Out Triggers). The cost of the upside call is derived from the premium sold in a short position. Due to high volatility in the current market, the option premium is juicy and investors can utilize this to generate a high yield by owing Snowballs.
How is the risk managed?
The payoff provided in the description is achieved through the assistance of trading desks that use delta hedging strategies to mimic the product's payoff. Sophisticated techniques like Montecarlo simulation are used to price these structures.
· Under what scenarios does the investor ends up making losses?
Investor will end up making loss only if the underlying falls below the lower Trigger level specified and stays below the initial level till the maturity of the contract.
· Interest Calculation Methodology
Simple interest is calculated for the tenor, e.g.-
30% * 180 /360 (i.e.,15) +Principal (100) if contingent condition not breached
Easycoins has emerged as the first crypto platform in the world that offers a fixed income simplified note to its retail investors. Furthermore, the snowball has emerged as a go-to product to enjoy the benefits of an uncertain market. Some salient features which make it suited for the current market conditions are.
The current market has bearish sentiment with the upside looking capped to a considerable extent. Snowball can offer a great upside (up to 30% APY) with large downside protection (Upto 35% fall). If we take the current level of BTC around 20,000 USD we will be able to get a 30% yield even if the market tanks to 13,000 while an investor with only BTC exposure would be reeling under huge losses.
· Directly buying assets exposes investors to daily price volatility risk, huge drawdowns, and uncertainty to make any significant returns. Snowball is a better product even in a sideways market. Investors tend to gain financially even if the underlying asset value stays still or does not appreciate.
· If you buy assets and trade with stop losses, chances are high that daily volatility might trigger your stop loss only to see the market going up again.
· For an average investor, the stress and research are not worth the returns in the current market scenario. Snowball is perfect for the current conditions to achieve high yield with no effort.
Crypto as a volatile market needs constant monitoring by an investor to ensure they do not lose out. Investments through Snowball are apt for investors who are keen on earning fixed income without the hassle, stress and risk of trading directly.
Currently, Bitcoin and Ethereum are available as underlying assets.
Is there probability of a loss?
Crypto is a volatile industry. To overcome the volatility of the industry, an investor who invests through Snowball receives fixed annual returns. This is however subjected to the drop in the underlying asset value. That is, an investor shall continue to receive fixed income as long as the underlying asset value does not fall by 35%. In any case, your loss will never exceed the loss equivalent to the holding of the underlying asset directly. Below is the scenario analysis for various market conditions
What is a Lock-up Period?
Lock up period is the time (generally 30-180 days) during which no knockout levels are observed. This also helps the investor to generate a minimum accrued coupon for the period in case the knockout happens to post the lock-up period provided the lower level has not been breached.
An investor is liable to receive the gains on their investment at the maturity unless the early redemption is triggered by the said person. Furthermore, your balance will be available in T+2 day format.
Are there any Upfront Fees?
Currently, no management fees are being charged for subscription
What is the minimum Investment?
You can start investing with as low as 2 USD
What currency can I use to invest in Snowball?
USDT can be used to buy Snowball. INR will need to be converted to USDT if you want to subscribe to Snowball
What is the tenor of the product?
The tenor of the product is currently 180 days subject to early redemption not occurring due to the Upper trigger level getting breached
Snowball offers an amazing avenue to invest your hard-earned money in bitcoin. It aims to reduce the volatility of the market to quite an extent by offering fixed income returns. Moreover, the lack of investors’ dependability on direct trade frees them off and allows them to focus on other duties while Snowball ensures timely returns on their investments.