Bitget Launches ‘Snowball’ to Safeguard Crypto Investment and Yield
Bitget launched Snowball, a new structured investment product designed to protect users’ principal while accumulating yield.
The company claims that Snowball offers users up to 24.5% Annual Percentage Rate (APR) while ensuring principal protection.
Cryptocurrency exchange Bitget, today announced the launch of its new structured investment platform, Snowball. The company claims that Snowball offers principal protection while providing users with up to 24.5% Annual Percentage Rate (APR). According to the company, Snowball caters to users with both Bullish and Bearish strategies.
“Snowball is a principal-protected structured financial product linked with the investment portfolio of the options market,” Gracy Chen, Managing Director at Bitget told Metaverse Post. “Bitget Earn optimized the traditional Snowball product earnings structure, designing it as a financial product that safeguards users’ principal, continuously accumulates yields and offers explosive growth in returns.”
“The name “Snowball” has been chosen to describe how the yields of this product, under specific conditions, accumulate like a rolling snowball, growing larger and larger,” she added.
The company said that the Bullish approach prioritizes safeguarding users’ principal while anticipating moderate price fluctuations or slight increases within specific price ranges. Likewise, the Bearish approach is ideal for users seeking to protect their principal while anticipating moderate price fluctuations or slight decreases within specific price ranges.
Mechanisms Behind Snowball’s High APR
Snowball’s Annual Percentage Rate (APR) of up to 24.5% is achieved through a principal-protected structured approach. It leverages market fluctuations, offering the potential for substantial returns while guaranteeing the return of the principal.
The platform offers two product types: Bullish and Bearish, each featuring its Knock-in and Knock-out prices. When the underlying asset reaches the Knock-in price, the APR increases, contributing to the cumulative yield.
By reaching the Knock-in price seven times within a seven-day subscription period, users can attain the maximum APR of 24.5%.
Bullish and Bearish Earning Cases
Bitget claims to supply all subscribing users with an extensive scale chart detailing knock-in and knock-out prices for both bullish and bearish scenarios.
Chen broke down how both approaches work in ensuring principal protection and optimizing returns:
In the Bullish Snowball Earning case, the Bullish_USDT/BTC_Snowball product is considered. This product offers a 3% base APR and a 7-day maturity period, consisting of seven 24-hour Observation Periods. Each Observation Period initiates at 16:00 (UTC+8) and features its specific Knock-in and Knock-out prices.
During each Observation Period, should BTC’s price reach the Knock-in price, a Knock-in event is recorded, resulting in a 3% APR increase, and no further Knock-in or Knock-out events are registered for that specific Observation Period.
Should BTC’s price fall below the Knock-out price, a Knock-out event is logged, leading to the premature termination of the product. Otherwise, the product matures after seven days.
Investors have the option to redeem their principal early, recovering liquidity before maturity or termination, albeit at the risk of reduced earnings.
The Crux of Knock-in and Knock-out Prices
Central to Snowball’s operation are the knock-in and knock-out prices, which define the price range within each observation period.
If the asset price touches or surpasses the knock-in price, the APR increases, while crossing the knock-out price results in the end of the observation period and automatic settlement, redeeming the principal and interest for users.
For Bullish Snowball, the upper limit of the price range is the knock-in price, and the lower limit is the knock-out price. In the case of Bearish Snowball: the lower limit of the price range is the knock-in price, and the upper limit is the knock-out price.
During each observation period, three potential scenarios can unfold:
- If the asset price reaches or surpasses the knock-in price, the cumulative APR for the product in the remaining period increases by 3%, and the current observation period concludes.
- When the asset price touches or surpasses the knock-out price, users will not receive any yields. This leads to the immediate conclusion of the current observation period, and the product will automatically settle, returning the principal and interest to users.
- In the event of minor fluctuations in the asset price, where it neither reaches the knock-in price nor the knock-out price, users will not accrue any yields for the current observation period.
Nonetheless, the product will stay active, and the subsequent observation period will be examined for potential knock-in or knock-out occurrences, which could result in cumulative yield earnings.
“However, users need to pay attention to capital utilization,” Chen warned.
“If the asset price experiences extremely high or low fluctuations and fails to touch the “knock-in price” for an extended period, and if users do not redeem early, it may lead to lower yields at settlement or frequent knock-out settlements,” Chen explained.
Bitget’s Vision for the Future
Bitget’s vision for cryptocurrency investment revolves around principal-protected products like Snowball.
Chen told Metaverse Post that Bitget Earn has dedicated much of its efforts to developing structured finance products. They have observed a growing preference among users for principal-protected products capable of delivering substantial floating returns.
“More and more users are shifting from traditional Flexible Savings to structured finance products like Snowball,” Chen told Metaverse Post. “Although the educational threshold for these types of products is relatively high, and the logic behind generating returns through options markets may be somewhat complex for users to grasp”
To help new users navigate Snowball effectively, Chen mentioned that Bitget provides guidance and educational resources.
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