Through its partnership, MetaWealth Technologies and PowerTrade are offering a novel investment product designed to offer institutional crypto investors a straightforward and customized mechanism to gain exposure to cash-settled future trades and staking options melded for individual portfolios.
The structured product uses liquid Ether staking as collateral for put options, which are bundled together on a four-month rolling basis. It seeks to earn passive, yield-bearing income from the staking while hedging the exposures with options designed to provide downside protection.
The initiative is gaining traction with institutional investors who are interested in the yield-bearing and stable income that staking provides, but want to mitigate the impact another market dive would have on the essential Ether holdings’ US dollar value. Through a combination of interest rate swaps and derivatives, the product is designed to act as a buffer against drawdowns as extreme as 90%.
Florian Drummen, MetaWealth CEO, said a series of pilot test-runs are underway. They intend to ink deals with about 10 funds by the end of the first quarter of 2023. The company estimates that 10% of that market will be attributed to related structured products. MetaWealth has teamed up with Lido to facilitate staking. It tells clients they can expect annual yields of 5 to 11%. Drummen said one needs to show that the technology works and they can get Ethereum staking returns but at a much lower risk because of downside protections. He outlined that market participants who have been bitten thrice this year have finally learned the lesson.
Bernd Sischka, PowerTrade’s head of institutional sales and business development, described the collaboration as a means to protect assets.