What is a SharkFin Structured Product?

Introduction

The crypto market is volatile, and failing to interpret market sentiment can easily lead to the loss of an investor’s principal. If, on the other hand, you refuse to enter the market out of fear and concern, you are less likely to use your assets to increase your wealth. Should you take part or not? To purchase or not to purchase? Many of you who are new to cryptocurrencies are faced with this decision.

However, what if someone told you today that there is a game where you can guess the rise or fall of cryptocurrencies, and if you guess correctly, you will get a higher return. On the other hand, if you guess incorrectly, you will not lose any money and will still get your capital back, plus a small covered return; you would be very interested. Simply put, you can make money whether correct or incorrect. Are you interested in finding out more?

While this may appear to be a dream, many people believe it’s another Ponzi money scheme they have never seen before. This game, however, is not a scam but an actual principal-guaranteed structured product, also known as a SharkFin financial product, that offers investors an annualized return of up to 25%.

What is a SharkFin Structured Product?

SharkFin is a low-risk principal-guaranteed structured product that helps users enhance yields without loss, regardless of market direction.

SharkFin’s yield is not fixed and is closely related to the type of product purchased by the user and market conditions. If a call SharkFin product is purchased, the yield will increase in addition to the basic guaranteed yield as the underlying asset’s price rises until a specific price ceiling is reached.

Bullish SharkFin product’s revenue curve

If a bearish SharkFin product is purchased, the yield will increase in addition to the basic guaranteed yield when the underlying asset’s price falls until some lower price limit is reached.

Bearish SharkFin product’s revenue curve

This type of financial product is called a SharkFin because the income curve looks like a shark fin emerging from the water.

There are three possible scenarios for the rate of return received by the user upon maturity of the SharkFin financial product, depending on the final settlement price of the underlying asset and whether the final price ever exceeded the price cap or price floor during the observation period：

1.Below the range

The portion will be acquired, regardless of the final settlement price, without any conditions.

2.Within the range

The settlement price of the underlying asset must fall within the settlement price range, and the settlement price must not exceed the upper or lower price limit during the Observation Period.

3.Above the range

The settlement price falls precisely on the highest yield boundary of the settlement price range. The settlement price did not exceed the upper or lower price limit during the observation period.

For example, Gate.io’s 7-day term “Daily BTC SharkFin” product is a daily SharkFin product with bitcoin as the underlying asset and a settlement price range of $18,500 to $20,000, with a guaranteed yield of 1% and a maximum yield of 16% as the price of bitcoin rises.

Assuming the user invests 1 BTC in this SharkFin finance product, they will get back at least 1 BTC of the principal invested plus 1% annualized return after 7 days of expiration, regardless of the change in the price of Bitcoin.

If the price of Bitcoin falls within the $18,500 to $20,000 ticker at maturity, the price cap of $20,000 is never breached during the observation period. The user will get back the 1 BTC invested plus an annualized yield ranging from 1% to 16%, with the yield increasing the closer the price cap is to $20,000.

If the price of Bitcoin falls within the $18,500 to $20,000 ticker range at expiration, a breach of the $20,000 price cap is recorded during Observation.

The user will receive 1 BTC of the principal invested plus a 1% annualized yield but will not receive the excess return.

How Does SharkFin Work?

SharkFin can generate income while protecting the principal because it combines fixed-income products like deposits and zero-coupon bonds with non-fixed-income financial derivatives like forward contracts and barrier options. Ordinary users need help to form on their own to create a structured product that necessitates a professional financial background and actuarial expertise.

SharkFin can provide investors with annualized yields of up to 25% without any risk of loss of principal while enjoying a potentially lucrative return. The main reason is that the underlying layer uses different hedging instruments and is linked to basket assets or securities so that the return on the product will be paid at maturity based on the underlying cryptocurrency’s risk level.

Considering user needs for principal-guaranteed financial management, Gate.io has optimized the underlying complex asset portfolio and hedging to provide a Settlement range of excess returns that rise in tandem with the current market price range, packaged into various types of SharkFin financial products from which users can choose.

The excess return of SharkFin products mainly comes from the Knock-Out Option, a barrier option. When the underlying asset price does not reach the Knock-Out Price, this type of financial derivative can provide users with a linearly increasing rate of return as the price rises or falls. However, suppose the underlying asset’s price exceeds the Knock-Out Price during the observation period. In that case, your product is knocked out, and you can receive only a guaranteed return or a guaranteed return plus a partial rebate.

When a user purchases a SharkFin product and finds that the settlement price falls within the settlement price range, it is disappointing that the underlying asset’s price exceeded the Knock-Out Price during the observation period. Hence, the user only receives the guaranteed return instead of the excess return. As shown in the example below, with a continuous price observation mechanism, the user will only receive a guaranteed return regardless of the final settlement price as long as the underlying asset has exceeded the Knock-Out Price boundaries at any point in time.

The market price will be settled with the guaranteed return as long as it exceeds the boundaries of the continuous price observation mechanism.

To increase users’ chances of getting high returns, Gate.io uses a discontinuous price observation mechanism. So even if the price of the underlying asset exceeds the strike price during the observation period, users still have the opportunity to get excess returns as long as the strike price is not exceeded at the time of observation. As shown in the example below, with the specified period price observation mechanism, even if the underlying asset has exceeded the strike price threshold for part of the period, it is still considered to have not exceeded the strike price.

The specified time period price observation mechanism can capture excess returns as long as the market price is within the boundaries at the time of observation.

Based on the comparison above, it is clear that Gate.io’s price observation mechanism is more beneficial to users, and the SharkFin products have a higher probability of earning excess returns.

Types of Gate.io SharkFin

Daily SharkFin

Daily SharkFin offers a broader selection of products with more flexible timeframes. Most of the Daily SharkFins on Gate.io are currently 7-day lock-in products with annualized returns ranging from 1% to 18%, depending on the underlying investment, market conditions, and settlement currency, as shown on the page.

Bullish SharkFin

Bullish SharkFin on the Gate.io platform is also a principal-guaranteed financial product, which has three different income outcomes:

Using the Bullish SharkFin Bitcoin product below as an example, assuming a settlement price range of $20,000 to $23,000. If the price of BTC falls below $20,000 by the settlement date; the investors can obtain the guaranteed yield rate; If the settlement price falls within the ticker price range of $20,000 to $23,000, the closer the price of the target asset is to the upper end of the price range at settlement, the higher the annual return will be; Assuming the settlement price rises above $23,000, the investors will obtain a medium yield rate.

Bullish SharkFin is available every Thursday, with an annualized return of 1% to 25%, primarily for 7-day lock-up periods, depending on the underlying investment, market environment, and settlement currency; please refer to the page for details.

Bearish SharkFin

The Gate.io platform’s Bearish SharkFin is also a principal-guaranteed product with three different return outcomes.

If the settlement price falls within the $15,000 to $18,000 range, the user will receive a higher yield that increases in tandem with the price drop; if the settlement price falls below $15,000, the user will receive a higher yield with a fixed value.

Currently, Bearish SharkFins are available every Thursday, with annualized returns ranging from 1% to 30%, primarily for 7-day lock-up periods, depending on the underlying market environment and settlement currency; please refer to the page for details.

Advantages of SharkFin products

Risk-free

Principal-guaranteed, creating risk-free yield opportunities for crypto holders.

High Yield Opportunities

For investors who can judge market volatility, SharkFin will provide higher returns than traditional financial products.

Easy to operate

All of the different types of SharkFin products are simple. The complex underlying hedging process has been structured and productized, and users can participate with just one click.

Disadvantages of SharkFin products

Risk of Locked Position

Once engaged, the funds are locked in and cannot be redeemed until the maturity date, even if they need to be used.

Value risk

Although it is capital protected for settling in BTC, it is still exposed to the risk of market decline for other settled methods.

Volatility Risk

SharkFin is more suitable for a smooth market; if the price breaks the knock-out price during the observation period, the user will obtain only the minimum guaranteed return.

What to consider before purchasing SharkFin

A SharkFin financial product has several essential parameters, and understanding the differences between products can help you make a better decision.

1. Guaranteed Return

The guaranteed return refers to the rate of return that the buyer of a SharkFin product will inevitably receive and may vary depending on the underlying portfolio assets. Please check if the guaranteed return is in line with the general market conditions before investing, usually using the lowest interest rate call products as a benchmark for comparison.

2. Maximum Return

The maximum return refers to the highest return that can be earned by the user who purchases SharkFin financial products, which may vary depending on the underlying portfolio assets.

3. Price cap or price floor of the underlying asset

The growth of the Bullish SharkFin product is limited by the price cap, while the price floor limits the growth of the return of the Bearish SharkFin product.

4. Settlement price range

The settlement price range refers to the price range in which the user will receive excess returns. You should pay attention to the reasonableness of the settlement price range of the SharkFin financial products you purchase.

5. Lock-up period

Funds purchased with SharkFin products are locked up and cannot be withdrawn during the lock-up period, so you should check if the lock-up period is too long before purchasing.

For example, suppose you find that the SharkFin product offers a lower guaranteed return than a call or a lower maximum return than a regular lock-up. In that case, other types of financing (call or lock-up) are alternatives with higher yields.

In addition, the upper price limit, lower price limit, and settlement price range must align with the current market conditions. If the underlying asset’s price is already above the price limit at the time of purchase, you should not buy a call-type product. Conversely, you should only buy a bearish product if the underlying asset’s price is above the lower price limit at the time of purchase.

The settlement price should also fall within a reasonable range; a settlement price range that is too far away can quickly become “visible but not eatable”, theoretically existing but practically almost impossible to obtain the yield.

How to buy SharkFin on Gate.io

Gate.io’s SharkFin products support flexible interest settlements to meet the needs of most investors. Buying SharkFin on Gate.io is as easy as the following four steps:

1.Log into your Gate.io account, click “Earn” - “Structured Products” at the homepage tab and enter the structured products page.

2.In the “Trending” section, you can view the product name, APR, investment term, start position, and other related information and select a product as needed by clicking.

3.On the product details page, you can check the product transaction and revenue rules and click “Buy Now” after confirming that there are no errors.

4.After successful participation, you can check the details on the ‘My Finance’ subpage.

5.The structured product interest payment time is determined by the rules on this financial product page, and you can check the average position and related interest in the transaction record field below.

Conclusion

SharkFin is a principal-guaranteed structured product that allows users to earn a risk-free yield and a higher annualized yield when certain conditions are met, depending on the underlying asset’s price during the lock-up period and at settlement.

Compared to traditional call and term products, structured products offer the risk and return of derivatives overlaid on top of fixed income, protecting the user’s principal and offering the potential for high returns. Users only need to predict the direction of the trend when purchasing the product, and they can get back their principal at the end of the lock-up period. Even if they make a wrong judgment, they will have a guaranteed return, making it a psychologically stress-free way to invest money.

The Gate.io platform also offers a variety of SharkFin products, including weekly SharkFins, daily SharkFins, bullish SharkFins, and bearish SharkFins. Whether you are new to the cryptocurrency market or a seasoned investor, SharkFin is a worthwhile financial product to purchase.