ETP Combining Gold and Bitcoin to Make Europe Debut

The first exchange traded product (ETP) combining gold and bitcoin has made its debut on the SIX Swiss Exchange.

ByteTree Asset Management said its 21Shares ByteTree Bold Index ETP, listing under the ticker BOLD, will soon be featured on a German exchange as well.

While gold ETPs and spot bitcoin ETPs are already available independently throughout continental Europe, BOLD is the first ETP to bring together “the best of the old and new worlds of finance,” according to Charlie Morris, chief investment officer of ByteTree Asset Management.

According to Morris, the fund rebalances monthly based on 360-day historic volatility, with the less volatile asset taking a higher weighting. Backtesting through to 2016 showed that gold would usually dominate the fund with a weighting of between 70% and 90%. 

However, Morris said that backtesting also demonstrated that the ETP’s active rebalancing strategy had improved returns by 7-8 percentage points a year. Between 2014-21, the ETP would have returned a cumulative 363%  compared to 3,816% for bitcoin, 58% for gold, 134% for the S&P 500 stock index.

Morris also acknowledged that annual fees will run to 1.49%, high for an ETP, but on the lower end for a crypto product. He said that the challenge of finding a custodian who could handle both physical gold and bitcoin caused this figure to swell. Ultimately, custodianship was split, JPMorgan handling gold and Coinbase dealing with Bitcoin. 

Analysts divided over ETP appeal 

As is the case with most novel crypto products, analysts are divided over its practicality and potential appeal. Todd Rosenbluth, head of research at ETF Trends, believes it could be broadly appealing. “Investors often think of bitcoin as an alternative investment to gold and other commodities, so to have a fund that is going to own both is compelling,” he said. The fund dynamically adjusting its respective weightings would also be a boon for investors, he added.

However, Kenneth Lamont, senior fund analyst for passive strategies at Morningstar, questions why investors would seek out this product. He does not see what investors would gain by combining the typically volatile products. “With these asset classes, volatility is not necessarily the enemy,” he said. “I’m not sure this is a sensible approach.”

As for bitcoin, “If you don’t want the volatility of bitcoin, then maybe you shouldn’t be involved in bitcoin,” he added. “In some sense you are buying it for its volatility.” In recent months, bitcoin’s slide has also tarnished its reputation as a hedge against inflation.

Lamont was also skeptical of BOLD’s potential longevity. “Ultimately these very niche funds don’t tend to survive,” he said. “They are perhaps overly complicated and the fees will clearly be a big part of this.”