Key takeaways:
- The 21Shares ByteTree BOLD ETP (BOLD) is traded on the SIX Swiss Exchange and tracks a customized index that includes bitcoin and gold.
- A physically-backed ETP that rebalances Bitcoin and Gold in inverse proportion to their risk on a monthly basis.
- BOLD is intended to be a core component of a well-balanced portfolio, with the goal of delivering statistically independent long-term returns and wealth protection in an inflationary environment.
The 21Shares ByteTree BOLD ETP (BOLD), created by the UK-based alternative investment provider ByteTree Asset Management and backed by Swiss crypto ETP provider 21Shares, is the very first ETP to incorporate the virtues of Gold and Bitcoin to generate an ingenious investment product.
ByteTree specializes in the provision and analysis of digital asset data. Today, it is a provider of institutional-grade crypto-asset data, which is used by investors all over the world, and it is now an adviser to two institutional-grade products, BOLD and the Bitcoin and General Fund.
21Shares is the first crypto Exchange Traded Product (ETP) issuer, with the most comprehensive product suite and one of the most innovative and complex research teams. On the SIX Swiss Exchange in 2018, it pioneered the world’s first cryptocurrency index listing. 21Shares’ goal is to provide all investors with a simple, secure, and controlled way to buy, sell, and short cryptocurrency using their existing bank and brokerage accounts.
The fund merges a millennia-old financial asset with upstart security dubbed the “new digital gold” by some — even if bitcoin’s recent decline has tarnished any public image it may have had as a place of refuge in disturbed or inflationary times.
The ETP’s goal is to provide inflation protection through optimized risk-adjusted exposure to bitcoin and gold, with assets weighted in inverse proportion to their risk.
BOLD, which is rebalanced monthly, has an 18.5 percent exposure to bitcoin and an 81.5 percent exposure to gold at launch.
To avoid the fluctuation that comes with Bitcoin, the ETP’s weightage has been partitioned in favor of Gold over Bitcoin.
Because gold is less volatile, it has been given an 81.5 percent weightage in the ETP, while bitcoin has been given an 18.5 percent weightage.
Although the ETP will be rebalanced monthly in inverse proportion to its risk, each asset will be given exposure in terms of managing volatility and enhancing returns.
“We are bringing gold into the twenty-first century by making bitcoin an acceptable asset to hold,” said Charlie Morris, a chief investment officer of ByteTree Asset Management, which is behind the 21Shares ByteTree Bold Index ETP, which trades under the ticker BOLD. A German listing is expected later this year.
Charlie Erith, CEO of ByteTree Asset Management, commented on the same CEO.
“Gold has historically provided portfolio protection in inflationary environments, whereas Bitcoin is the digital equivalent of gold, with investors increasingly adopting it as a distinct asset class and a primary store of wealth.” In an era of rising structural inflation and increased geopolitical risk, we believe this can serve as an important risk and return diversifier in a well-diversified portfolio.”
While both gold ETPs and spot bitcoin ETPs are widely available on their own — at least in continental Europe — Morris claimed that ByteTree’s active redistribution tactic continued to improve returns by 7-8 percentage points per year in backtesting.
Hany Rashwan, co-founder and CEO of 21Shares, commented on the launch, saying, “This hybrid product combines the traditional value of gold with the promising return rates of bitcoin, which is widely regarded as the new gold.”
In order to maximize risk-weighted returns, the fund will restructure monthly based on 360-day historical volatility, with the less volatile asset receiving a higher weighting. In practice, this means that gold tends to monopolize the portfolio, with a scaling factor of 70 to 90% in backtesting dating back to 2016.
The traditional balanced portfolio of 60% equities and 40% bonds has struggled this year as both asset classes have sold off at the same time. “60/40 works in a deflationary period,” Morris said. In an inflationary environment, BOLD is the 60/40 rule, balancing a risk-on asset with a risk-off asset.
Morris claimed that in backtesting, the ETP was less volatile than eight of the top ten US stocks over the last five years, with only Berkshire Hathaway and Johnson & Johnson beating it.
It stands to reason for BOLD to give Bitcoin less weightage because an example of its volatility is currently visible on the charts.
BTC has battled to keep a constant movement above $40k over the last two weeks, and yesterday, after falling by 5.7 percent, it lost the level of support once more.
