Following the popular BTC & USDT Smart Earn and BTC Gold Range Accrual, PoolinWallet now launches the latest BTC & USDT structured investment product Dual Currency Deposit (DCD).
Disclaimer
PoolinWallet DCD is non-principal protected. The return on the DCD investment will be affected by the performance of the underlying tickers. Also, past performance is not a guarantee of future performance. Investors are advised to carefully consider all risk factors before making a deposit into DCD products.
This article does not purport to explain all aspects of DCD in detail and PoolinWallet accepts no liability for any reliance placed or investment decisions made from it. Besides, please note that all numbers are for illustrative purposes only.
What is PoolinWallet DCD?
PoolinWallet DCD is a structured product that allows investors to earn an increased interest rate as compared to the base rate that would be earned on any regular fixed and/or flexible term deposit products whilst also achieving a more favorable selling price when it comes to converting the initial deposit to USDT. DCDs are typically short-term yet high APR products. The return on the DCD will be affected by the performance of the underlying ticker, in this case, the Deribit BTC or ETH Index. PoolinWallet will compare the delivery price to the target price to see whether to payout the initial deposit and interests in BTC or USDT. The interest rate will stay the same regardless of whichever payout so that investors could lock in the interest rate by confirming their deposits. That is to say that investors deposit BTC and they will always end up receiving more BTC or USDT plus interest in all circumstances. However, as non-principal protected products, it is possible for the investor to get back less than the initial deposit even after interest is factored in. It is also important to acknowledge that a DCD does not constitute a hedge against adverse exchange rate moves as the currency conversion is not guaranteed at maturity.
There are four key parameters that play important roles in the return and the payout of DCDs, namely the currency pair, the APR, the target price, and the tenor. The following sections will brief the rationale for choosing a DCD product.
Factors to Consider Before Making a DCD Investment
The DCD in essence is an investment whereby investors go and bet on the movement of the underlying ticker. Typically, a DCD consists of a fixed deposit and an option, and the enhanced interest rate brought by DCD comes from the premium obtained by shorting long options. In other words, investors are selling the potential hypothetical unknown upside above their max reference price (target price) in return for a high guaranteed payout if nothing happens. Set out from this, a practical approach would be to pick a maximum price you think BTC (for BTC/USDT DCDs) will go in your chosen timeframe as the reference to choose the target price and the tenor of a BTC/USDT DCD. The target price is ideally near the level at which investors are comfortable having their initial deposit potentially convert into USDT at maturity. If on maturity the delivery price is below the target price, no conversion takes place and investors will receive back their initial deposit plus the enhanced interest in the initial deposit currency. On the contrary, if on maturity the delivery price is at or above the target price, their initial deposit will be converted at the pre-agreed conversion rate (i.e., the target price), and investors will receive back the USDT along with the enhanced interest in USDT. This means that in both scenarios investors will always receive back the enhanced interest, which separates DCD from other equivalent fixed or flexible term deposit products.
It is important to be aware that the DCD is set for a fixed term so that investors cannot convert or receive the funds back before the expiry. But thankfully, the tenors of PoolinWallet DCD are typically from 1 day to 1 week, which brings flexibility and more options to meet distinct investment needs and risk preferences.
DCD’s Pros
- Notably Higher Interest Rate
* Enhanced returns compared to conventional deposit products
* What-you-see-is-what-you-get APR regardless of the payout currency - Investment Portfolio Diversification
* Exposure to either major crypto or USDT
* Choose from BTC/USDT, ETH/USDT, and beyond (available soon) - Flexible Tenure & Short Maturity
Typically vary from 1 day to 1 week, meet various investment needs and risk preference - No Additional Fee
All fees and charges are imputed within the DCD pricing. - Favorable Conversion Rate
Selling at the target price on maturity can be more favorable than the initial market rate.
DCD Key Parameters
- DCD Currency Pair
PoolinWallet will launch BTC/USDT DCDs and ETH/USDT DCDs in the first update. Investors deposit BTC into BTC/USDT DCDs and will end up receiving more BTC or USDT plus enhanced interest. Likewise for ETH/USDT DCDs.
- Maturity
The maturity date is the same as the expiration date of long options sold by DCD products. Details on maturity, tenor, and settlement time can be found in the section “How Tenor Affect the Yield and APR?” of this article.
- Yield & APR
The interest in DCDs comes from the premium by shorting long options. In other words, the yield and tenor of DCDs are fixed as the premium and maturity of underlying options are fixed. Moreover, the interest rate of DCDs will stay the same regardless of whichever payout so that investors could always lock in the yield & APR by confirming their deposits. The APR is measured by yield and tenor and the formula is included at the end of this article.
- Target Price
The target price is equivalent to the strike price of long options shorted by DCD products. The lower the target price investors pick, the higher the interest rate will be for DCDs sharing the same tenor. At present, PoolinWallet offers 1 level of the target price for 1-day DCDs and 2 levels of target prices for weeklong DCDs, which applies to both BTC/USDT and ETH/USDT DCDs. Please note that some DCDs with certain target prices may not be available for deposit if the underlying liquidity of options is insufficient or the gap between the target price and the market price is too small.
- Delivery Price
The delivery price is calculated using the average of the Deribit BTC or ETH index over the last 30 minutes before the expiry (maturity). PoolinWallet will compare the delivery price to the target price to see whether to proceed with settlement in BTC (ETH) or USDT.
- Underlying Ticker
The performance of the underlying ticker determines the delivery price. The underlying ticker for PoolinWallet BTC/USDT DCDs is Deribit BTC Index and Deribit ETH Index is used for ETH/USDT DCDs.
- Payout & Settlement
The principal amount to be received at maturity is tied to the price movement of the underlying ticker for each selected DCD pair. Please note that the currency initially deposited will appreciate against USDT.
New Products Release Rules of DCD
(The following rule applies to all BTC/USDT, ETH/USDT DCDs)
PoolinWallet DCDs can be divided into two main categories by tenors. DCDs with roughly 1-day tenor are updated and available at 8:00 AM (GMT+8), Monday to Sunday, with automatic payout proceeds at 4:00 PM (GMT+8) the next day after deposit.
All weeklong DCDs are updated exclusively at 8:00 AM (GMT+8) every Friday, with deposit opening till the next Tuesday at 8:00 AM (GMT+8), and automatic payout proceeds at 4:00 PM (GMT+8) the next Friday after deposit.
How does Tenor Affect the Yield and APR?
The interest in PoolinWallet DCD accrues daily. The tenor over 8 hours will be regarded as 1 day while the tenor less than 8 hours will not be included in interest calculations. For instance, the tenor will be set as 1 day if an investor makes a deposit at 7:00 AM (GMT+8) into a DCD product which expires at 4:00 PM (GMT+8) the same day.
Ideal Market for DCD
The return of BTC/USDT DCDs will be maximized if BTC dumps at the maturity, then pumps afterward. If BTC simply keeps going sideways, investors can just keep accruing more BTC using DCDs.
DCD’s Cons
- Non-Principal Protected Investment
The investment value might be worth less than the initial amount. DCD investors will always receive the weaker of the two selected currencies. - Early Withdrawal Unavailable
DCD investors cannot terminate and withdraw their initial deposits before DCD matures. - Adverse Crypto Exchange Rate
DCD investors will be exposed to the crypto price movement risk of the selected DCD pair. Without hedging, investors may either benefit or lose out in initial deposit currency as a result.
PoolinWallet DCD Payout & Settlement Scenarios
PoolinWallet DCD empowers investors to earn attractive yields regardless of price movement in the choppy market. Customized DCDs covering more target prices and tenor options are available through OTC services. Explore more by contacting jesse.r@poolin.io
PoolinWallet Team
June 10th, 2022
PoolinWallet
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