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- Structured Products in Crypto | An Introduction
Structured Products in Crypto | An Introduction
What the heck are structured products and why should I care? Here's the introduction, with an extra bit of alpha on why you should care. Trade options, perps, and multi-leg strategies seamlessly with low latency on Kyan.
Please note that Kyan does not provide investment advice, and nothing herein should be construed as such. Anyone considering trading or holding derivatives or crypto assets should be aware that the risk of loss can be very high, and it is upon each individual to seek advice from an appropriate professional advisor.
This is our introduction to a three-part series covering structured products and what people can expect from them in crypto. Join our Discord to ask some questions and learn more!
Despite being worth over $3 trillion, the structured products market represents one of the most misunderstood investment vehicles available today.
Many investors remain unfamiliar with structured products and their potential applications. These instruments offer a unique investment proposition, the ability to build any payoff an investor might want, but mostly they are used to mitigate downside risk in volatile markets while still capturing upside potential.
Structured products combine the safety of bonds (native yield) with the growth potential of derivatives, creating tailored investment solutions that can be customized to meet specific risk-return objectives. For investors seeking greater control over their portfolios with defined outcome investing, structured products can serve as powerful portfolio tools because of their flexibility and customization options that can be tailored to individual client needs.
Primer: What is a Structured Product?
A structured product is fundamentally an investment that provides returns based on the performance of an underlying asset. These assets can span equity markets, crypto, indices, funds, interest rates, currencies, and commodities. The payoff and level of capital at risk can be predefined, with payoff profiles are designed to capitalize on rising, falling, or range bound markets. Whatever you can imagine, it can be structured.
Every structured product consists of four main components working in harmony:
Underlying — The reference assets that serve as the foundation for performance measurement. Notes are linked to the price return of cryptos, stocks, bonds, commodities, indices, and other financial instruments that determine how the investment will perform.
Protection — The capital preservation mechanism that shields investors from underlying asset declines, typically implemented through zero-coupon bonds (TradFi) or native yield (crypto), though protection levels vary widely across products with some offering partial, full, or no principal protection.
Maturity — The predetermined time horizon for the investment, usually ranging from six months to 10 years in TradFi, days to months in Crypto. This represents the lifespan of the investment during which the structured product will track its underlying assets.
Payoff — The final return structure that investors receive at maturity. This represents the present, expected return delivered to the investor based on how the underlying assets performed during the investment period.
This combination creates a hybrid investment that offers both downside protection and upside participation, characteristics typically unavailable in traditional investments (just long perps/stocks).
Structuring a product yourself may sound easy, but creating a structured product independently is comparable to assembling a computer from individual components versus purchasing a pre-built system. In the case of Structured Products, the Investment Manager is the computer builder. It is much easier to have it built, sold, and managed for you than it is to do everything by yourself.
Current Crypto Structured Product Offerings
The crypto derivatives market has witnessed some innovation in structured products, with major exchanges like OKX and Bybit offering retail-accessible crypto structures. By now, I would expect more, but this is a start.
These platforms provide Snowball structures, which are accumulator products where investors have a pre-determined purchase price usually set at a discount to the initial fixing price. They also offer Shark Fin products that provide principal protection with leveraged upside participation when prices remain within specific ranges, and Dual Currency Investment products that earn enhanced yields by accepting the risk of being paid in a different cryptocurrency when trading pairs like BTC/USDT move against the investor's position.
Unlike traditional structured products relying on zero-coupon bonds, these crypto variants leverage native yields, staking rewards, and derivative strategies to create 24/7 accessible products with lower minimums and instant settlement. This representing a significant evolution toward more accessible and efficient structured investment vehicles for the digital asset ecosystem.
Which Protocols Will Unlock Structured Products for Crypto in the Future?
Traditional finance has developed every type of derivative imaginable, enabling structured products to flourish as a core offering for clients globally.
In crypto, we're now seeing similar innovation with the creation of yield bearing stablecoins, native staking, liquid staking, and other mechanisms that serve as building blocks for more sophisticated structured products. Centralized exchanges already offer structured products, while DeFi projects like Cega and Unravel have pioneered more complex, or as we say… exotic structures.
Kyan's upcoming launch will feature perps and options. As Kyan evolves with features like cross-collateral and vault functionality, they will be equipped to develop various structures that will allow users to deploy capital into different investment strategies.
Note: Cega was sold.
Global Market Landscape
The global structured products market encompasses $3 trillion in outstanding instruments, with regional distribution mostly in Asia, followed by Europe, then the USA. This market originated in Europe in 1976 with the first structured note created in London, later gaining popularity in Switzerland and Germany. The market has experienced steady growth across all major financial centers, though its applications differ significantly by region.
Unlike in the United States, where structured products remain primarily institutional investments, they serve as retail investment vehicles in Europe and Asia. This difference reflects varying regulatory environments, investor sophistication levels, and market development patterns.
New tech has democratized access to structured products in recent years, making them more transparent and efficient while reducing fees. What was once exclusively available to institutional investors and ultra-high-net-worth individuals through private banking is now accessible to a broader investor base through financial advisors and fintech apps.
Crypto-native Opportunities for Structured Products
Crypto markets present unique opportunities for structured products, particularly given the absence of traditional crypto bonds and the emergence of native yield mechanisms.
Unlike traditional markets where zero-coupon bonds provide the protective foundation for structured products, crypto structured products can leverage native staking yields from assets like Ethereum, which generates returns through network validation, or yield-bearing stablecoins like USDC/T that earn returns through exchange deposit rewards, or DeFi borrowing/lending protocols.
These native yield sources can replace the bond component in traditional structures, creating products that offer exposure to volatile crypto assets while providing built-in income generation. For instance, a crypto structured product might combine ETH staking yields with options strategies to create downside protection while maintaining upside participation in Ethereum's spot price movements. Similarly, products could use USDC/T yield as the protective base layer while incorporating derivatives linked to Bitcoin or other cryptocurrencies, effectively creating principal-protected exposure to digital assets.
The programmable nature of decentralized finance also enables more sophisticated structures, such as dynamic hedging mechanisms and automated rebalancing features that can adjust protection levels based on market conditions. While regulatory frameworks for crypto structured products continue to evolve, the underlying technology, 24hr trading, and native yield mechanisms provide compelling building blocks for the next generation of structured investment solutions.
Note: Structures can be built on any token from majors to memes.
Structured Product Example: PPNs
As mentioned before, Structured Products are custom to the investors needs. If you can dream of a payoff, it most likely can be created. I don't want to scare anyone off in our first article of the structured product series, so let’s keep it real light today.
Principal Protected Notes (PPNs) are designed for conservative investors who want to participate in market growth while protecting their initial investment.
These structures guarantee you won't lose your original principal (as long as the issuing exchange/bank remains solvent), but any returns are tied to how well an underlying asset performs. The trade off is simple: you get safety, but you typically give up some potential gains compared to investing directly in that market. This is created by having a spot position paired with a derivates package.
Marty, Explain It Like I’m Five
Think of PPNs as a safety net for your money.
Let's say you have $100,000 worth of Bitcoin today. You're worried Bitcoin might crash, but you also don't want to miss out if it goes up.
A PPN lets you have the best of both worlds, but it comes with a catch. If Bitcoin drops by 80%, you still get your full $100,000 back when the investment matures. But if Bitcoin doubles, you might only get 50% of those upside gains instead of the full 100%.
It's like having insurance on your investment… you pay a premium (by giving up some upside) to protect against losses. You can adjust how much protection you want — more protection means less potential upside participation, and less protection means more upside participation, but with more risk.
This is just one quick example, in future articles of our structured product series we will go over more and more complex structures and how they work. We didn't want to lose you on the first one!
Conclusion
Structured products represent investment solutions that can effectively address diverse portfolio needs across the risk spectrum.
From conservative principal protected structures suitable for risk averse investors to yield enhancing products designed for those willing to accept higher risk profiles, these instruments offer unparalleled customization and flexibility within the modern investment landscape.
As crypto markets continue to evolve and become increasingly complex, structured products provide valuable tools for investors seeking defined outcomes and enhanced risk return profiles. While not suitable for every investor or situation, they represent an important component of portfolio management.
The combination of downside protection, upside participation, and customization capabilities makes structured products particularly relevant in today's challenging investment environment.
Follow up in the Telegram: Kyan discord, twitter, for lvl 2 which will cover the inner workings of various structured product offerings
What Does Kyan Mean for Crypto Options?
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