First-Ever "Hybrid" ETP Bets On Gold And Bitcoin As Inflation Hedge 

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by Tyler Durden
Thursday, Apr 28, 2022 - 09:45 AM

A novel exchange-traded product, combining Bitcoin and gold, has been launched on the SIX Swiss Exchange and comes when threats of stagflation have battered traditional 60/40 or risk-parity portfolios. 

Switzerland-based firm 21Shares and U.K. alternative investment provider ByteTree Asset Management announced Wednesday BOLD ETP (ticker BOLD) to provide "protection against inflation, giving optimal risk-adjusted exposure to bitcoin and gold." 

BOLD ETP includes 81.5% Gold and 18.5% Bitcoin. The ETP will "rebalance monthly according to each asset's inverse historical volatility (360-day)," 21Shares' factsheet about the new product said. 

"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," said Charlie Erith, CEO of ByteTree Asset Management, in a statement

"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," Erith said. 

21Shares co-founder and CEO Hany Rashwan said people in the crypto world view Bitcoin as a digital alternative to gold. He explained: 

"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."

BOLD's effort to boost returns in this challenging macro environment comes as 60/40 portfolios have been battered by the down move of stocks and bonds. For the past two decades, stock and bond prices have usually moved inversely, but that's not the case as inflation soars to decade highs as central banks rush to remove liquidity from the global financial system via quantitative tightening. 

However, Bloomberg Intelligence's James Seyffart believes "gold and Bitcoin are more aptly described as complementary assets in a portfolio, rather than the common narrative that one supplements the other or is a substitute for the other." 

 "Perhaps over time Bitcoin will exhibit characteristics more similar to gold, but right now, Bitcoin is still a risk asset in our view," Seyffart said. 

Maybe the era of equities and bonds is coming to a close as a new era of structural inflation pushes more investors into gold and Bitcoin.