1.What is Snowball?
A snowball is a non-principal-protected structured product that offers multiple observation opportunities during its term. At each observation, the product may either be redeemed early with a 100% principal return and a high interest rate or undergo a currency conversion. The product is designed to achieve high returns under various market conditions, but it carries a significant risk: in the event of a sharp one-sided downturn (or upturn), the investment currency may be converted to another currency at the initial rate.
2.Product Features
Multiple Settlement Scenarios: When the underlying asset reaches the take-profit level, the snowball product can be settled early, allowing investors to lock in returns.
Risk Protection Mechanism: A currency conversion occurs only if the underlying asset breaches the protection level, which may result in a potential loss.
3.Snowball Terminology
Observation Price: The average price of BTC/USD between 15:30 and 16:00 (UTC+8) on the observation day.
Initial Price: The average BTC/USD price between 15:30 and 16:00 (UTC+8) on the start date.
Knock-Out Event: Occurs if the BTC/USD observation price exceeds the take-profit level between 15:30 and 16:00 (UTC+8) on an observation day.
Knock-In Event: Occurs if the BTC/USD observation price breaches the protection level between 15:30 and 16:00 (UTC+8) on an observation day.
Protection Price: A price level set to mitigate investment risks, primarily serving to protect the investor's principal or returns from excessive losses during significant market fluctuations. When the product reaches the protection price, a knock-in occurs, leading to early settlement.
Take-Profit Price: A price level set by the investor to lock in existing profits and prevent a reversal in market prices from eroding gains. When the product reaches the take-profit price, a knock-out occurs, leading to early settlement.
4.Snowball Example
The product has a fixed maximum term. If a knock-out or knock-in event occurs, it will be redeemed early and settled.
Snowball bullish BTC-USDT
When users use USDT to purchase bullish snowball products, there will be the following three situations:
If neither a knock-in nor a knock-out event occurs (i.e., the observation price remains between the take-profit price and the protection price), the investor will receive at maturity: the principal (USDT) + profit (USDT), where:
Profit (USDT) = Principal × Maturity × Reference APR / 365
If a knock-out event occurs (i.e., the observation price exceeds the take-profit price), the investor will receive the principal (USDT) + profit (USDT) at the time of the knock-out. The profit is calculated as follows:
Profit (USDT) = Principal × Holding Period × Reference APR / 365
If a knock-in event occurs (i.e., the observation price breaches the protection level), the investor will receive the converted principal (BTC) + profit (BTC) at the time of the knock-in. The calculations are as follows:
Converted Principal (BTC) = Principal (USDT) / Initial Price
Profit (BTC) = Principal × Holding Period × Reference APR / 365 / Observation Price on Day of Knock-In
Snowball bullish BTC
When users use BTC to purchase bullish snowball products, there will be the following three situations:
If neither a knock-in nor a knock-out event occurs (i.e., the observation price remains consistently between the take-profit price and the protection price), the investor will receive the following at maturity: the principal (BTC) + profit (BTC), where:
Profit (BTC) = Principal × Maturity × Reference ARP / 365
If a knock-out event occurs (i.e., the observation price exceeds the take-profit level), the investor will receive the principal (BTC) + profit (BTC) at the time of the knock-out. The profit is calculated as follows:
Profit (BTC) = Principal × Holding Period × Reference ARP / 365
If a knock-in event occurs (i.e., the observation price breaches the protection level), the investor will receive a portion of the principal (BTC) + profit (BTC) at the time of the knock-in. The calculations are as follows:
Partial Principal (BTC) = Principal (BTC) × Observation Price on Day of Knock-In / Initial Price
Profit (BTC) = Principal × Holding Period × Reference ARP / 365
Snowball bearish BTC-USDT
When users use USDT to purchase bearish snowball products, there will be three situations:
If neither a knock-in nor a knock-out event occurs (i.e., the observation price remains consistently between the take-profit price and the protection price), the investor will receive the following at maturity: the principal (USDT) + profit (USDT), where:
Profit (USDT) = Principal × Maturity × Reference APR / 365
If a knock-out event occurs (i.e., the observation price exceeds the take-profit price), the investor will receive the principal (USDT) + profit (USDT) at the time of the knock-out. The profit is calculated as follows:
Profit (USDT) = Principal × Holding Period × Reference APR / 365
If a knock-in event occurs (i.e., the observation price breaches the protection level), the investor will receive a portion of the principal (USDT) + profit (USDT) at the time of the knock-in. The calculations are as follows:
Partial Principal (USDT) = Principal (USDT) × Initial Price / Observation Price on Day of Knock-In
Profit (USDT) = Principal × Holding Period × Reference APR / 365
Snowball bearish BTC
When users use BTC to purchase bearish snowball products, there are three situations:
If neither a knock-in nor a knock-out event occurs (i.e., the observation price remains consistently between the take-profit price and the protection price), the investor will receive the following at maturity: the principal (BTC) + profit (BTC), where:
Profit (BTC) = Principal × Maturity × Reference APR / 365
If a knock-out event occurs (i.e., the observation price exceeds the take-profit price), the investor will receive the principal (BTC) + profit (BTC) at the time of the knock-out. The profit is calculated as follows:
Profit (BTC) = Principal × Holding Period × Reference APR / 365
If a knock-in event occurs (i.e., the observation price breaches the protection level), the investor will receive the converted principal (USDT) + profit (USDT) at the time of the knock-in. The calculations are as follows:
Converted Principal (USDT) = Principal (BTC) × Initial Price
Profit (USDT) = Principal × Holding Period × Reference APR / 365 × Observation Price on Day of Knock-In
5.What are the potential risks of Snowball?
Snowball is not a capital-guaranteed product. When the price of the underlying asset reaches or falls below the preset knock-in price, currency conversion may occur and cause losses.
Digital asset transactions contain extremely high risks, and digital assets are traded uninterrupted throughout the day. The User should determine the suitability for investing digital assets products based on their own financial situation and risk preference.
Disclaimer
This article is for informational purposes and for reference only. The content of this report does not constitute investment advice, an offer to sell, or a solicitation of an offer to buy, to residents in the Hong Kong SAR, the United States, Singapore and other countries or regions where such offers or solicitations may be prohibited by law. Digital assets transactions can be extremely risky and volatile. Investment decisions should be made after careful consideration of individual circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this article. Although the content in this report has been taken from sources that are believed to be accurate, no warranty or representation is made by Matrixport as to its correctness, completeness, timeliness or accuracy.