The first-ever exchange-traded product (ETP) combining Bitcoin and gold is now live in Europe
First-ever Exchange-Traded Product Combining Bitcoin and Gold Has Launched
In Europe, the first-ever exchange-traded product combining Bitcoin and gold has launched, promising long-term returns as well as inflation protection, at least in theory.
According to the issuing parties, the novel Exchange-Traded Product aims to bring together “the best of the old and new worlds of finance” by betting on gold’s portfolio hedging power as well as the “strong” returns of the most well-known crypto token.
21Shares ByteTree BOLD ETP (ticker: BOLD) is a physically-backed index product created by Swiss crypto ETP provider 21Shares and U.K. alternative investment provider ByteTree Asset Management.
“Gold has historically delivered portfolio protection in inflationary environments, while Bitcoin is the digital equivalent of gold with growing adoption by investors as a distinct asset class and a core store of wealth. In a time of rising structural inflation and heightened geopolitical risk, we believe this can act as an important risk and return diversifier in a balanced portfolio.”
— Charlie Erith, CEO of ByteTree Asset Management
At launch, gold, the less volatile of the two assets, was given a higher weighting of 81.5 percent, while Bitcoin was given an 18.5 percent weighting. In order to manage volatility and boost returns, the ETP rebalances both exposures each month in inverse proportion to their risk.
Market Participants Remain Skeptical Of Bitcoin’s Suitability
Many market participants remain skeptical of Bitcoin’s suitability as an inflation hedge, particularly given the cryptocurrency’s negative correlation with gold.
Bitcoin’s and gold’s 50-day moving averages have been hovering around -0.4, the lowest level since 2018. The scale runs from -1 to 1, with 1 indicating that the assets are moving in lockstep and -1 indicating that they are not.
While an exchange-traded fund (ETF) that combines Bitcoin and gold is a first, the concept of leveraging the two assets is not.
The Incrementum Digital & Physical Gold Fund, a small open-ended unit trust incorporated in Liechtenstein in 2020, allocate investments between cryptocurrencies and gold. Its assets total around 20 million euros ($21 million).
Meanwhile, in the United States, interest in Bitcoin-linked ETPs peaked in late 2021 with the launch of the country’s first Bitcoin-linked ETF, the ProShares Bitcoin Strategy ETF (BITO), which became the country’s second-most heavily traded fund at the time.
The idea of a physically-backed Bitcoin ETF has been repeatedly dismissed by the US Securities and Exchange Commission since then.