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Bitcoin was once considered too volatile, too unregulated, and too fringe for the kinds of financial instruments that respectable Wall Street firms package up and sell to wealthy clients. No longer.
In July, Jefferies Financial Group Inc. issued the first US structured note tied to BlackRock Inc.’s Bitcoin exchange-traded fund. Since then, at least three other banks, including Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co., have followed suit. Together, they’ve sold more than $530 million in notes linked to iShares Bitcoin Trust (IBIT), according to Structured Products Intelligence, part of WSD.
In effect, banks are wrapping crypto exposure into new products that offer returns tailored to distinct risk appetites with some downside protection.
The pitch: investors get leveraged upside if Bitcoin rises and a buffer if it falls. A Jefferies note, for example, doubles IBIT’s gain, up to a 90% cap, while cushioning the first 20% decline. If IBIT drops 50%, investors would lose just 30%. Many of the newer notes follow a similar formula, touting access to crypto-linked returns, while limiting investor stress over the daily swings of the underlying asset.
Marex Group Plc, a UK broker expanding into the US, recently launched a note tied to two stocks including Bitcoin miner TeraWulf Inc., a response to client demand during this year’s crypto drawdown that’s pushed the token roughly 30% below its record high. The firm now plans to roll out IBIT-linked notes to American clients.
“I’m convinced that the demand is there,” said Joost Burgerhout, Marex’s head of financial products. “We’re seeing more and more institutional validation of Bitcoin as an asset class. I would expect other issuers to come to the market with notes linked to IBIT and I’d expect the volume to continue to grow.”
Even with the sweeping crypto selloff since October, IBIT has raked in around $67 billion in assets since launch. That liquidity makes it easier for issuers to price structured notes and manage risk.
Ether, the second-largest cryptocurrency, has also entered the arena, with both Morgan Stanley and JPMorgan this month offering notes tied to iShares Ethereum Trust ETF (ETHA).
Not everyone is sold. Gary Garland, founder of Integrated Wealth Solutions, uses structured notes, but avoids crypto-linked products entirely. To Garland, Bitcoin lacks the underlying fundamentals that investors typically rely on to judge value. The notes don’t fix that; they just wrap it in complexity.
Wall Street “is trying to weaponize Bitcoin’s volatility, using firecrackers and feathers,” he said. “To me, Bitcoin in general is a horse race that doesn’t even have horses. You have gamblers betting on race results when we don’t have horses.”
Structured notes tied to Bitcoin remain a sliver of the broader $200 billion market. These products blend elements of fixed income and derivatives, offering debt-like securities with higher returns than conventional bonds. They typically appeal to wealthy individuals, family offices and discretionary managers seeking to tailor risk in portfolios.
To Aaron Brachman, executive managing director at Washington Wealth Group of Steward Partners, it’s another example of Wall Street’s ability to engineer yield out of buzzy investment themes. The irony is, what once stood as the antithesis of traditional finance — decentralized, opaque, and famously volatile — is being reabsorbed into its machinery.
“Anytime that there is money to be made on investments, there’s going to be someone creative on a Wall Street bank that’s going to find a way to make money off of it,” said Brachman, whose team advises clients on structured notes but hasn’t utilized crypto-linked products. “And the hope is always that it is in the best interest of the consumer and not just trying to align with their own pockets.”