Bitcoin and Gold Record Divergence
Gold’s volatility has risen sharply while Bitcoin’s has remained stable, and so the BOLD Index has increased exposure to Bitcoin at the expense of Gold.
BOLD aims to deliver protection against monetary inflation, giving optimal risk-adjusted exposure to Bitcoin and Gold
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The 21Shares Bitcoin Gold ETP (BOLD) invests in Bitcoin and Gold. Due to their naturally low correlation, the diversification benefits of holding both assets have been unusually high. Bitcoin prefers risk-on market conditions, while Gold prefers risk-off.
Rather than having the same amount of value invested in each asset, the BOLD strategy aims to hold equal amounts of “risk” in each asset and is hence “risk-weighted”.
BOLD allocates to Bitcoin and Gold on a risk-adjusted basis using historical volatility calculated from daily price movements. The less volatile asset, with lower daily price moves, receives a higher weight in the index at the end of the monthly rebalancing. The monthly rebalancing transactions, which repeatedly top up the weaker asset, have added significant value compared to a buy-and-hold strategy.
Inflation Protection
Gold has proved itself a store of value over thousands of years, and Bitcoin is its digital equivalent. Both are hard assets that are deemed to protect investors from inflation. Gold tends to lead when the economy is contracting, in contrast to Bitcoin, which has performed best when the economy has been expanding.
Risk Management
The strategy adjusts weightings monthly according to historical volatility. The less volatile asset will be accorded the higher weighting. By automatically adjusting weightings, the rebalancing aims to smooth and enhance combined returns over time. This is because the strategy continually favours the less risky asset, as measured by historic volatility.
Portfolio Diversification
Bitcoin and Gold provide diversification to a balanced portfolio. BOLD offers investors a convenient way to invest in Bitcoin and Gold in a structure that prudently manages risk. Rebalancing transactions are carried out within a tax-efficient structure.
More Information and Data
The BOLD.report website is packed with more information about the BOLD Index and BOLD ETFs, as well as Bitcoin and Gold datasets.
Enquiries
For information on investing in BOLD, contact bold@bytetree.com.
If your investment firm or media outlet would like a private briefing on BOLD, we will be happy to oblige. If a physical meeting is not possible, we can arrange a Zoom call.
About the Editor
Charlie Morris is the Editor of the BOLD Rebalancing Report. He is also the Chairman and Chief Investment Officer of ByteTree, which he founded in 2014 as a platform for delivering independent, robust, and thought-provoking market analysis.
Charlie's pioneering gold valuation model, developed in 2012, was published by the London Bullion Market Association (LBMA) and the World Gold Council (WGC). It is widely regarded as a major contribution to understanding the behaviour of the gold price. Fascinated by the emergence of a new asset class but unsure how to make sense of it, he started analysing the Bitcoin blockchain in 2013.
Prior to ByteTree, Charlie has 25 years of fund management experience and is a pioneer of multi-asset investing. At HSBC Global Asset Management, he launched the Absolute Return Service in 2002, which grew to over $3 billion. Much of that success came from moving away from the crowd and embracing a wider range of asset classes that were not familiar to traditional investors at the time.
Subsequently, Charlie managed the Total Return Fund at Atlantic House Fund Management until June 2020, when it was ranked number 1 out of 48 funds in the Trustnet Target Absolute Return Sector. He sits on the investment committee for the Society of Technical Analysis and on the Board of Halkin Services, a renowned investment think tank. He has regularly been featured in leading news publications and has given numerous presentations to investment bodies and Universities.
Prior to a career in finance, Charlie served as an officer in the Grenadier Guards, British Army, having graduated from the Royal Military Academy Sandhurst in 1994.
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