Compass Investments

– What you should know: JPMorgan Chase has introduced a structured bond tied to BlackRock’s IBIT that targets a four-year cycle of declining BTC value.

The instrument guarantees investors a minimum 16% return if the price of BTC falls within a specified range by 2026, with the possibility of increasing payouts by 2028.

Market participants are at risk of loss if the ETF backed by this bond declines by more than 30% by 2028. This structured note from JPMorgan Chase, which is cryptocurrency-based and follows the classic four-year cycle of declines followed by rises, may be a suitable addition to your portfolio.

The new product, reported by Bloomberg this week in a regulatory filing, allows for essentially unlimited gains if BTC stays below a certain point in 2026 but then rises sharply by the end of 2028.

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The pattern clearly correlates with Bitcoin’s historically recorded four-year cycle: the cryptocurrency traditionally enters a prolonged bear market about two years after a halving year, followed by a rebound in the year of the halving and the following year. Since the last halving occurred in 2024, Bitcoin is expected to experience a downward correction in 2026 and then resume growth in the following year, i.e. 2028.

This structured note comes at a time when major institutional players on Wall Street are actively seeking complex cryptocurrency products, nuances and strategic investments to participate in the volatile swings of BTC.

How it works: If BlackRock’s spot Bitcoin ETF, IBIT, backed by a bond, reaches or exceeds a price level set by the bank by the end of 2026, JPMorgan will redeem the bond, providing investors with a minimum return of 16% .

If IBIT fails to reach its price target by the end of next year, the bond will remain in effect until 2028, providing an opportunity for potentially higher returns.

Investors can then increase their investment by 1.5 times with no cap if the ETF exceeds the price set by JPMorgan Chase at the end of 2028. This means that if BTC rises strongly over this period, the potential gains could be quite substantial.

The product also offers some collapse protection: investors can recover their investment in 2028, provided that the IBIT ETF quotes do not fall by more than 30% at that point. However, if the ETF falls more significantly, losses will be directly correlated to the size of the decline, exposing bondholders to the risk of losing money beyond that limit.

Bonds do not guarantee a return of par value. If the bonds are not redeemed early and their final value is below the [30% ] barrier level, you will lose 1% of the face value for every 1% by which the final value falls below the initial value, JPMorgan explained in describing the risk profile.

Accordingly, in such scenarios, you risk losing more than 40.00% of the principal amount at maturity, and you may lose all of your invested capital at maturity.