21Shares combines bitcoin and gold in risk-optimized ETP

Apr 28th, 2022 | By | Category: Alternatives / Multi-Asset

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Digital asset ETP specialist 21Shares has launched a new ETP in Europe which is the first globally to combine exposure to bitcoin and gold.

21Shares combines bitcoin and gold in new ETP

BOLD is the first ETP globally to combine exposure to bitcoin and gold.

The 21Shares ByteTree BOLD ETP (BOLD) has been listed on SIX Swiss Exchange where it is available to trade in US dollars, pound sterling, euros, and Swiss francs.

A cross-listing on Deutsche Börse Xetra is expected in the near future.

Developed in partnership with ByteTree Asset Management, a UK-based manager of alternative investment strategies, the ETP pairs one of the world’s oldest investments with the largest and most popular crypto asset.

According to 21Shares and ByteTree, the combined allocation delivers several portfolio benefits including diversification and long-term growth potential, as well as hedges against inflation and geopolitical risk.

Hany Rashwan, CEO and co-Founder of 21Shares, commented: “At 21Shares, we are excited to introduce the public to the world’s first bitcoin and gold ETP. This hybrid product combines the traditional value of gold with the promising return rates of bitcoin which is considered by many as the new gold. With BOLD, we enter completely new territory and once again demonstrate the pioneering spirit of 21Shares within the ever-evolving crypto space.”

Charlie Erith, CEO of ByteTree Asset Management, added: “The BOLD investment strategy is a unique approach to blending a high return digital asset with a traditional store of value, with a low correlation to equities and bonds. 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.”

Gold and bitcoin tend to be counter-cyclical to each other. Bullion historically has performed well in “risk-off” environments and is known for its safe-haven status during major geopolitical turmoil. The price of gold rose briefly to $2,070/oz in March 2022, slightly off its all-time high and representing a year-to-date gain of 13.2%, as the war in Ukraine escalated. The gold price has since pulled back, however, perhaps reflecting investors’ expectations that the US Federal Reserve will normalize monetary policy at a faster rate than previously thought.

Bitcoin, on the other hand, has tended to perform well in “risk-on” environments with a correlation to the S&P 500 of as much as 0.50. The token has slumped roughly 17% year-to-date, while the S&P 500 is down 12.8%.

Gold has a well-established reputation as a store of value that can protect against rising prices; however, the jury is still out on bitcoin, especially considering the token’s dismal performance this year while inflation has soared to levels not seen in over three decades.

Risk-optimized approach

The ETP gains its exposure by tracking the Vinter Bytetree BOLD Inverse Volatility Index which comprises exposure to bitcoin and gold, rebalanced monthly according to the inverse volatility of each asset over the previous year. Due to high volatility in crypto assets, the ETP’s allocation was approximately 82% to gold and 18% to bitcoin, as of 27 April.

An investment in the ETP is 100% directly backed with corresponding investments in gold and bitcoin. Physical gold holdings are stored in JP Morgan vaults, while the ETP’s bitcoin is placed in institutional-grade cold storage managed by Copper.

The ETP comes with an expense ratio of 1.49% which is notably high considering the average for ETPs that individually track the underlying assets – Europe’s cheapest gold ETFs have expense ratios of just 0.12%, while the lowest-cost bitcoin ETP is priced at 0.65%. Based on BOLD’s current allocation, an investor could replicate the position for fees of approximately 0.22%.

BOLD’s appeal, however, may be its ability to automatically manage risk on a regular basis, offering a liquid, convenient, and prudent means of gaining access to both gold and bitcoin in a single trade.

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