The National Bank of Bahrain (NBB) unveiled the Gulf’s first Bitcoin-linked structured product developed in partnership with crypto firm ARP Digital. The investment is only available to accredited investors. Structured products invariably include derivatives and are often customized for investors.
The Bitcoin-linked structured product will allow some returns from a crypto price rise, but the amount its capped. However, the product claims to offer 100% downside protection.
“We are proud to introduce this bespoke structured investment, which blends the appeal of digital asset exposure with the security of capital protection,” said Hisham AlKurdi, Group Chief Executive – Markets & Client Solutions at NBB. “This product underscores our focus on offering our wealth management clients innovative and secure avenues to diversify their portfolios.”
100% Bitcoin downside protection?
If the 100% downside protection sounds too good to be true, it’s probably not. A collar is a classic options strategy. That would involve holding the underlying Bitcoin, and buying a put option at the current price (quite expensive), which lets you sell if Bitcoin’s price falls. Additionally, it involves selling a call option at the capped return price. The money earned from selling the call option can be used to offset part or all of the cost of the put option. However, we don’t know the precise structure of this particular product.
While NBB is listed on the local stock exchange, two government linked organizations own 55% – the sovereign wealth fund Bahrain Mumtalakat Holding and the Social Insurance Organization that manages Bahrain government pension funds. ARP Digital was founded by a Goldman Sachs veteran.
