In early November, Matrixport announced the world's first structured product "Installment Purchase", which attracted more than 5 million US dollars in one week after its launch and was well received by the market and investors. According to official information, through the "Installment Purchase" product, investors can use small amounts of funds to purchase and lock in all future returns of the investment target (BTC or ETH). Investors can enjoy the leverage effect without adding margin. They only need to decide whether to pay the balance in exchange for the investment target based on the actual price of the target after maturity.
In this regard, we can derive the following keywords for "installment purchase": "enjoy the leverage effect", "no need to add margin", "determine whether to exercise after the product expires". In terms of not having to add margin alone, it has solved the pain points of countless investors. Coinglass data shows that on November 14, the total contract holdings of the entire network were approximately US$99.45 billion, with a 24-hour liquidation of 831 million, a double liquidation of long and short positions, a liquidation of 497 million long positions, and a liquidation of 334 million short positions (real-time data at 10:40 on November 14). Under the Trump market, the volatility of the crypto market has further increased. So is "installment purchase" relying on the fact that there is no need to worry about the risk of liquidation before the product expires and no need to add margin to firmly grasp the hearts of investors? In fact, this is only part of the advantage.
In order to provide investors with first-hand investment information, we have deeply experienced Matrixport's "Installment Purchase" product, and conducted a comprehensive analysis of the financial derivative prototype of the "Installment Purchase" product, the product principle of "Installment Purchase", product advantages and potential risks, so that you can quickly understand the hottest encrypted structured wealth management product "Installment Purchase".
1. Warrants, the prototype of traditional financial derivatives "installment purchase" is popular among traditional investors
Warrants have a history of more than 100 years and are the basic product of financial derivatives.
In 1911, American Light & Power first issued and used warrants. Warrants have a history of more than 100 years. The essence of a warrant is an option purchase and sale contract. The party who pays the premium to purchase the warrant has the right (but not the obligation) to buy (or sell) a pre-agreed amount of the underlying asset at a pre-agreed price within a certain period in the future or when it expires. The underlying asset can be local stocks, foreign stocks, basket securities, index shares, bonds, currencies, commodities, etc.
The essence of a warrant is the purchase and sale of an option. Due to its advantages such as convenient financing, risk hedging, and high leverage, warrants have been widely accepted by the market and developed rapidly in the past 40 years. Statistics show that by the end of 2000, 42 of the 55 member exchanges of the International Stock Exchange Federation (FIBV) had launched warrants.
Instalment warrants are the most popular type of warrant on the ASX and are used by Australian superannuation funds.
The Australian warrant market, established in 1991, has become one of the most popular warrant markets in recent years. In the initial stage, Australia only had stock subscription warrants, and later the varieties gradually became richer, such as installment warrants, structured warrants, trading warrants, knock-out warrants, commodity warrants, etc. Installment warrants are the most popular type of warrants on the Australian Stock Exchange (ASX) and are also one of the few leveraged investment tools available to Australian pension funds.
Installment warrants allow investors to pay a down payment of a certain percentage of the value of the underlying assets to obtain exposure equivalent to the underlying securities, and give investors the right to choose to pay (or not pay) the balance at an agreed date in the future.
2. Detailed explanation of Matrixport's global first encrypted structured product - installment purchase
The basic principle of "installment purchase" product
"Installment Purchase" combines crypto assets with the traditional financial investment tool "Installment Warrant". Investors can use installment payments to lock in the potential returns of crypto assets in advance, and the settlement method after maturity is flexible. Investors can choose to pay the balance to obtain the complete investment target share, or not pay the balance and directly settle the cash value, or directly extend the term according to the current cash value.
We can roughly understand the "installment purchase" product as an upgraded version of "installment purchase of housing". Investors pay a down payment to lock in the future income of the property. When it is time to pay the balance, if the housing price continues to rise, investors can choose to pay the balance to obtain the property, or not pay the balance and directly "settlement of income" (cash value). If the housing price falls after the expiration, the user can choose not to pay the balance and exit after settling the cash value, or choose not to pay the balance and not exit, but choose a new property from the builder and use the cash value as a new down payment to lock in the future income of the new property.
For example, an investor uses USDT worth 0.2 BTC to pay a down payment to lock up 1 BTC. After maturity, he can choose to pay the balance to obtain 1 BTC, or choose not to pay the balance for cash value settlement or extension.
Actual cases to demonstrate the benefits of installment purchases
For intuitive demonstration, we will demonstrate with an example: It is known that the BTC price is $82,016.40 at 19:45 on November 11. If an investor purchases a BTC installment purchase product that expires in 15 days, the down payment is $13,643.86 and the balance is $70,000.
Assume that the BTC settlement price is $95,000 after the 15-day product expires
Scenario 1: Pay the balance of $70,000 and receive 1 BTC (assuming the investor sells the BTC immediately after receiving it)
The actual profit of the investor in 3.8 days = 95,000-70,000-13,643.86 = 11,356.14 $
3.8 days’ rate of return = 11,356.14/13,643.86*100% = 83.2%
APY = 3.8 days' rate of return / 3.8*365 = 83.2% / 3.8*365 = 7991.578%
Scenario 2: No final payment is made and cash value settlement is performed (assuming the investor sells BTC immediately after receiving it)
Cash value available = (95,000-70,000)/95,000*1=0.2631 BTC
The actual profit of the investor in 3.8 days = 95,000*0.2631-13,643.86=11,350.64 $
Since the final payment has not been made, we compare the spot and installment purchase products:
Assume that an investor purchases the same spot BTC with a down payment amount ($13,643.86) when the BTC price is $82,016.40 at 19:45 on November 11:
The spot BTC amount obtained by investors = 13,643.86/82,016.40 = 0.16735 BTC
When the BTC price is $95,000, the corresponding amount of BTC value = 95,000*0.16735=15,898.25 $
Investors earn profit from investing in BTC spot = 15898.25-1,3643.86=2,254.39 $
In the same context as above, the return on installment purchases using the same amount is (11,356.14-2,254.39)/2,254.39=4.0373 times higher than that on spot BTC.
Scenario 3: No balance payment, cash value extension
Investors can choose to use the settled cash value as the down payment for the next "installment purchase" product and enter the next round of investment.
In the current context, the cash value obtained = (95,000-70,000)/95,000*1=0.2631 BTC is used as a down payment to start the next round of installment purchase products.
"Installment Purchase" is equivalent to providing investors with a low-risk leveraged product. The reason for the leverage effect is that the cost of installment payment is lower than the cost of purchasing a full share. Generally, the higher the final payment, the higher the leverage ratio. The "Installment Purchase" product currently provides investment target purchases with a maximum leverage of nearly 10 times, and users do not need to add margin after purchase.
At the same time, the "installment purchase" feature of installment payment and diversified delivery and settlement allows investors to achieve the same asset allocation goals with less funds, and the money saved can be used to invest in other investment targets, thereby improving the overall capital utilization rate of asset allocation, achieving the goal of diversified investment, risk diversification, and maximizing returns.
Reasonably understand the possible risks of "installment purchase" products
Continuing with the above “Installment Purchase” product example, assume that the BTC settlement price after the 15-day product expires is $80,000
Under the premise of BTC price falling, assuming that investors do not pay the balance and directly settle the cash value
Cash value available = (80,000-70,000)/85,000*1=0.125 BTC
Investor asset loss = 13,643.86 - 80,000*0.125=3,463.86 USDT
To sum up, we can summarize the potential risks of "installment purchase" products into the following two points:
Risk of currency price fluctuations: The risk of currency price fluctuations faced by using "installment purchase" products to purchase investment targets (such as BTC or ETH) is the same as purchasing spot products. It is affected by market liquidity, FOMO sentiment and macro factors. If the currency price goes down, users may bear the risk of asset loss. Investors can reasonably configure bearish tools to hedge risks.
Leverage risk: "Installment purchase" is equivalent to providing investors with a low-risk leverage product. When investors' expectations of the underlying assets are correct, they will gain leverage gains; if not, they will also suffer leverage losses. However, leverage losses are limited, and losses are limited to the down payment.
3. Matrixport launches the world’s first “installment purchase” product, bringing new gameplay to crypto financial derivatives
As a long-established one-stop crypto financial service platform, crypto asset management products have always been Matrixport's strength, especially in the structured product track. Matrixport once led the release of the "dual currency" product in 2019, triggering a wave of structured financial management. Five years later, the launch of "installment purchase" brought Matrixport back into the market spotlight. Warrants are a basic product in traditional derivative financial instruments. Introducing their concept into the crypto world is not only conducive to enriching the current ecology of crypto financial derivatives, but also conducive to the integrated development of crypto finance and traditional finance.
At present, Matrixport's structured products are in full bloom, including Dual Currency, Snowball, Shark Fin, Trend Profit, Seagull, Installment Purchase, etc. The products cover people from low-risk preference investors to aggressive investors. At present, Matrixport's fund management and custody volume has reached 6 billion US dollars.
A practitioner from the Matrixport asset management team revealed to the reporter that some of Matrixport's new structured products have entered the product development stage. We are looking forward to what kind of structured products Matrixport will launch next, and we also hope that Matrixport can continue to be the leader in the crypto asset management track and help investors capture rational returns.
