Declining Returns in Crypto Asset Management: Quantitative Strategies Under Pressure

The current crypto asset‑management market is experiencing a marked downturn in returns, with clear signs of an “asset shortage”. Many once‑steady arbitrage strategies have seen a sharp narrowing of spreads: for example, the annualized yield of risk‑free BTC‑denominated arbitrage has fallen below 2%, while stable‑coin‑based arbitrage strategies have dropped to below 6%–8% annualized. Yields on major exchanges’ coin‑denominated savings products are near historic lows—OKX’s flexible BTC savings offer only about 0.5% annualized, and even a 30‑day lock‑up on Binance delivers just 1% annualized BTC yield. At the same time, flexible USDT rates have generally sunk below 2%, far from the double‑digit levels seen previously. Overall, “yield compression” in low‑risk crypto asset‑management products has become the consensus.

Quantitative hedging strategies are likewise under strain. Long/short and CTA approaches have recently suffered drawdowns, and many quant funds have seen NAV declines. Under extreme conditions, some teams have even faced “black‑swan” events: since 2017, the crypto market has undergone several bouts of extreme volatility, and more than 80% of quant trading teams lacking adequate risk controls failed to manage risks properly, ultimately suffering major losses or exiting the market. In the latest bear cycle, events such as the May 2022 LUNA collapse and the “FTX blow‑up” triggered steep price drops, catching many trading desks off guard and greatly complicating capital management. After successive risk events, quant shops have tightened risk‑control standards, yet with low volatility, it has become harder to earn excess returns, leaving managers in a dilemma.

More seriously, persistently falling volatility has intensified the sense of “asset shortage.” Bitcoin’s price volatility has declined markedly: during the 2021 bull‑market peak, BTC’s annualized volatility briefly topped 100%, but since 2023 it has hovered below 50%, and even at the March 2025 local peak volatility was only about 40%. This unprecedented calm hampers strategies reliant on wild swings, while traditional sources of yield—such as perpetual‑swap funding rates and basis trades—have shrunk dramatically. Trading volume is sliding as well: weekend BTC turnover has dropped to a record‑low 16% share, leaving the market desolate. When high‑yield assets are scarce but idle capital is plentiful, investors acutely feel they have “no assets to deploy”—a true portrait of today’s crypto market.

Investors Turn Elsewhere: Structured Products Offer Steady Coupon Income

Amid generally falling yields, an increasing number of investors are looking to structured products as a new path to stable returns. Using refined risk‑tranching and structural design, these products can deliver relatively steady coupon income across different market conditions, filling the gap left by traditional quant strategies. Many structured notes can still pay the agreed coupon in mildly volatile or range‑bound markets and even post positive returns in modest down‑moves. Such coupon‑bearing certificates embed derivatives trades: by sacrificing part of the payoff in extreme scenarios, they secure steadier returns and some downside protection in the most probable scenarios. For crypto investors now eager for “quasi‑fixed‑income” returns, structured products provide a compromise: avoiding full exposure to sharp coin‑price swings while earning yields well above the risk‑free rate.

Compared with traditional quantitative hedging, structured products offer greater certainty of returns. Conventional strategies depend on a manager’s market timing and positioning, leaving results highly sensitive to volatility. Structured products pre‑define payoff conditions and risk boundaries; by selling options to collect premiums, they lock in coupon income, so returns mainly come from holding to maturity rather than trading P&L. The classic Snowball, for instance, lets investors receive sizable interest periodically as long as the underlying doesn’t plunge, even when the market moves sideways. This “selling volatility for yield” model stabilizes cash flows. Fixed Coupon Notes (FCNs) similarly split capital between fixed‑income assets and short put options, so the investor receives fixed coupons and only bears limited risk if the underlying crashes. These designs convert hard‑to‑forecast volatility into more predictable coupon returns, hugely attractive to yield‑seeking capital.

Leveraging this advantage, structured derivatives have begun to stand out in crypto. Matrixport, a leading one‑stop crypto‑finance platform, was early in building a diversified structured‑product lineup offering solid yield tools. Live products include Accumulators, Decumulators, range‑knock‑out Snowballs, FCNs, daily‑settled Dual‑Currency Investment, and zero‑interest borrowing via option hedges. Each has unique features: Accumulators let investors buy assets periodically at a discount in choppy markets, achieving a “cost‑averaging” build‑up; Decumulators help large holders unload at higher levels via preset strikes, acclaimed as a “smart choice” for miners and long‑term holders to cash out in bull markets; Snowball, Shark Fin, and similar products target differing scenarios with extra yield or protection. By allocating among these, investors can choose strategies aligned with their market view, boosting returns while controlling risk. As JPMorgan Private Bank has noted, in a rising‑risk environment, structured products can bolster portfolio resilience, enhance risk‑adjusted returns, and cushion future volatility.

Importantly, though structurally complex, user experience is improving. Matrixport has optimized traditional accumulator mechanics for crypto investors, adding daily observation, weekly settlement, flexible parameter tuning, and professional guidance so ordinary users can participate easily. With simple customized operations, investors can tailor structured solutions to their expectations. This democratization of professional tools lowers the entry bar for sophisticated strategies. All told, as crypto settles into a low‑volatility, low‑yield “new normal,” structured products—stable coupons, flexible customization, controllable risk—are winning favor among more institutions and HNWIs.

Lessons from Tradition: How Snowballs and Autocalls Predominate in Low‑Volatility Markets

Structured products are not unique to crypto; their trajectory in traditional finance offers valuable insight. As early as the 2000s, Snowball‑like derivations were widespread overseas, designed by investment banks and distributed via private banks and asset managers. These flourished during low‑rate, low‑volatility periods, becoming mainstream tools for steady returns. After the 2008 crisis ushered in a long era of low rates, Autocallable notes (including Snowballs, range accumulators, etc.) linked to equity indices proliferated across Europe, the U.S., and Asia. Because deposits and bonds yielded almost nothing, investors turned to coupon‑bearing structures to “boost” income. A decade ago, Autocalls made up about 10% of the structured‑note market; today, they claim 40%–50% globally, half the sector. In Europe, this is especially stark: retail structured products linked to FTSE‑100, EuroStoxx‑50, and the like are dominated by Auto‑Call designs. This shows that in low‑rate, low‑volatility eras, structured derivatives meet investors’ specific yield‑and‑risk preferences, evolving from niche tools into mainstream allocations.

Asia has likewise seen explosive growth. In hubs such as Hong Kong and Singapore, private banks rolled out Accumulators in the mid‑2000s so HNWIs could bulk‑buy stocks in sideways markets. Experience also showed structure must match risk tolerance; reckless participation could mean losses. The industry then improved risk control, adding knock‑out features and loss caps, and regaining trust. In the low‑vol/low‑rate climate of the late 2010s, Snowballs and range accumulators resurged and entrenched themselves.

Mainland China started later but grew rapidly. In 2017, brokerages issued the first onshore Snowballs; though early bear‑market losses slowed issuance, warming markets and demand for absolute returns after 2020 sparked explosive growth. According to Nancai Licaitong’s data, by end‑2022, there were 69 Snowball‑structure bank wealth products, 75% of all derivative‑linked wealth offerings (studies suggest including hybrids may top 85%). Similarly, fixed‑coupon‑plus‑option “coupon‑enhanced” structures—exemplified by FCNs and other Autocalls—are increasingly popular in private banking. Even during bull‑to‑bear shifts, Autocalls maintain over 40% of structured issuance. For instance, during 2022 equity‑market swings, sales of index‑linked Autocalls by major investment banks held firm, with many balanced portfolios still allocating 40 %+ to these products. Evidently, whether bull or bear, structured products enjoy steady demand in appropriate contexts.

The reason is clear: whenever markets enter a “low‑volatility, low‑yield” phase, structured products often leap from “niche derivative” to “mass‑market investment.” Snowballs in 2000s Hong Kong or late‑2010s mainland China boomed amid range‑bound equities and falling rates. Their clever derivative designs offer yield/risk combos unavailable from conventional assets: coupons above market averages plus some downside buffer—exactly what investors want during an “asset shortage.” Thus, from mature Western to emerging Asian markets, structured products have repeatedly proven their vitality. Given the similarities between today’s crypto environment and those scenarios, traditional cases map a possible path: when risk‑free rates are too low and volatility suppressed, structured products step onstage as a mainstream route to steady income.

Outlook: Structured Products as a New Source of Yield in the “Asset‑Shortage” Era

In sum, the crypto asset‑management industry is in a unique period of scarce returns and uncertain risk; the “asset shortage” is pushing the market to change faster. Against this backdrop, structured products are set to play an ever‑larger role as a new yield engine in crypto. On one hand, with pre‑designed risk‑mitigation features (knock‑in/out levels, tiered payouts, etc.), they can tightly control extreme risk while locking in medium‑to‑high fixed returns. This artful risk/return balance matches current investor preferences: seeking yields above inflation and risk‑free rates yet wary of violent swings. With quant strategies faltering and spot yields meagre, structured notes offer a compromise: hedge uncertainty via derivatives while filling the yield gap with coupons. As insiders note, in protracted low‑rate settings, many investors “can no longer obtain satisfactory returns from Treasuries and high‑grade bonds and have to seek more complex products to get the desired coupon.” The same trend is now unfolding in crypto.

On the other hand, the flexibility and customizability of structured products will attract more institutional money and HNWIs. Unlike one‑size‑fits‑all traditional wealth products, structured solutions can be tailored to risk appetite and market view. For instance, an investor bullish on a major coin long‑term yet anxious about near‑term volatility can pick a Snowball or Shark Fin with downside protection—“stepping on the gas” while “fastening the seat belt.” Miners holding large spot positions can use a Decumulator at bull‑market highs to lock in gains piecemeal, avoiding market impact. Diversity lets products serve both offensive and defensive needs, exactly what institutional portfolio optimization requires. Family offices and crypto hedge funds increasingly prioritize controllable‑risk yield sources; structured products fit the bill for building “all‑weather” strategies. In traditional markets, large asset managers long ago made structured notes portfolio staples; similar adoption is likely in crypto allocations. Especially as global regulation clarifies and compliant supply grows, institutional interest is rising. Many crypto hedge‑fund managers plan to raise structured‑trade weightings in the coming years to enhance portfolio yield stability and resilience.

Taken together, structured products are poised to become a key yield source in the crypto “asset‑shortage” age. For investors seeking steady appreciation, they offer a new path that balances return with risk control: through innovative financial engineering, they can lock in relatively certain payoffs amid uncertainty. Of course, structured products are not risk‑free; counterparty credit, liquidity, and potential extreme‑scenario losses remain concerns, so investors must fully read the terms and assess their tolerance. Nevertheless, history and current trends suggest that as product design grows more mature and transparent, its advantages will stand out ever more. Structured products are set to occupy a firm place on the future crypto asset‑management map: institutions and HNWIs alike will allocate more to them. With the “easy‑money” era gone, skillful use of structured tools to earn steady coupons will become the new investment wisdom. The crypto market is moving into a more rational, finely‑tuned stage, and the rise of structured products is a highlight of this evolution. As understanding deepens and regulatory frameworks improve, these products may well replicate in crypto the success they enjoyed in traditional finance, continually creating “stable yet profitable” value for investors.

To conclude the current trend, low volatility and asset shortage are not scary—clinging to old ways is. The rise of structured products is broadening investors’ horizons, helping them rediscover yield under controllable risk. On crypto’s path toward mature development, these products will keep injecting new vitality, bridging traditional financial wisdom and crypto innovation. Looking ahead, crypto investors might embrace structured thinking to seek simple yet reliable returns in a complex market. As practice shows, when markets pose challenges, financial innovation eventually provides answers. Structured products may indeed be the “key to breaking the deadlock” in today’s crypto asset‑shortage era.