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- Incrementum Digital & Physical Gold Fund, a tiny open-ended unit trust founded in Liechtenstein in 2020, divides investments between cryptocurrency and gold. Its assets total over 20 million euros ($21 million).
- In the United States, interest in Bitcoin-linked ETPs peaked in late 2021 with the debut 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.
- At inception, gold, the less volatile of the two assets, was given a larger weighting of 81.5 percent, while Bitcoin was given an 18.5 percent weighting. In order to manage volatility and increase returns, the ETP rebalances both exposures each month in inverse proportion to their risk.
In Europe, the first-ever exchange-traded product combining Bitcoin and gold has launched, promising long-term gains as well as inflation protection, at least in principle. According to the issuing parties, the novel ETP intends to bring together the best of the old and new worlds of finance by betting on gold’s portfolio hedging potential as well as the strong returns of the most well-known crypto asset.
Rising Structural Inflation And Heightened Geopolitical Risk
21Shares ByteTree BOLD ETP (ticker BOLD) is a genuinely supported file item made by Swiss crypto ETP supplier 21Shares and U.K. alternative investment provider ByteTree Asset Management. Bitcoin is the digital counterpart of gold, with rising adoption by investors as a distinct asset class and a primary store of wealth, said Charlie Erith, CEO of ByteTree Asset Management, in a statement. We believe this can operate as an essential risk and return diversifier in a balanced portfolio during a period of rising structural inflation and heightened geopolitical risk.
At inception, gold, the less volatile of the two assets, was given a larger weighting of 81.5 percent, while Bitcoin was given an 18.5 percent weighting. In order to manage volatility and increase returns, the ETP rebalances both exposures each month in inverse proportion to their risk.
Many market participants remain skeptical of Bitcoin’s usefulness as an inflation hedge, particularly given the cryptocurrency’s poor correlation with gold. Bitcoin’s and gold’s 50-day moving averages have been lingering 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.
Our team believes that gold and Bitcoin are better represented as complementary assets in a portfolio than the prevalent narrative that one supplement or replaces the other, said James Seyffart of Bloomberg Intelligence. Perhaps Bitcoin will develop qualities more akin to gold over time, but Bitcoin remains a risk asset in our opinion for now.
Assets Total Over 20 Million Euros
While an exchange-traded fund (ETF) that combines Bitcoin and gold is a first, the principle of leveraging the two assets is not. Incrementum Digital & Physical Gold Fund, a tiny open-ended unit trust founded in Liechtenstein in 2020, divides investments between cryptocurrency and gold. Its assets total over 20 million euros ($21 million).
Meanwhile, in the United States, interest in Bitcoin-linked ETPs peaked in late 2021 with the debut 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 consistently dismissed by the US Securities and Exchange Commission since then.
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Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
