Alejandro ArriecheThe Swiss-based financial services firm 21Shares just launched the world’s first exchange-traded product (ETP) that provides exposure to both gold and Bitcoin (BTC).
The 21Shares Bytetree Bold ETP (BOLD) has been listed on the Swiss SIX stock exchange and is already available to be bought and sold. This product provides exposure to a portfolio comprised of 83.7% worth of gold and 16.3% worth of Bitcoin (BTC) and will charge a flat 1.49% fee per year.
The purpose of BOLD is to act as a hedge against inflation by combining two assets that are considered by many investors as the best stores of value at a moment when inflation is spiking in multiple latitudes. That includes BTC as the digital asset shares some of the characteristics that have made gold an attractive alternative to protect investors’ net worth against a deterioration of the purchasing power of fiat currencies.
Thus far, 21Shares is managing $2.5 million for investors and 125,000 shares have been issued in this first tranche.
21Shares specializes in the creation and commercialization of financial products that facilitate access to the crypto market for both individual and institutional investors. The company has already launched 31 exchange-traded products that track the value of either individual cryptocurrencies or diversified portfolios that focus on a segment of the market.
Recently, the company launched the first Australian Bitcoin and Ethereum (ETH) exchange-traded fund (ETF) as the oceanic country continues to embrace digital assets within its financial system.
How does an ETP work?
An exchange-traded product (ETP) is a financial instrument that provides exposure to certain assets. These products can be classified either as exchange-traded notes (ETNs), which are agreements where the holder is entitled to receive the gains produced by the underlying asset they track once the instrument expires.
Meanwhile, exchange-traded funds (ETF) – which is the case of BOLD – are investment vehicles that provide exposure to a portfolio comprised of one or more underlying assets.
These funds issue shares that can be traded in the public markets in the same way as a regular stock and their price is set by the net asset value (NAV) of the portfolio the fund holds. However, shares can trade at a premium or discount of their NAV in some specific cases.
According to BOLD’s prospectus, the portfolio’s composition will be rebalanced every month based on the inverse historic volatility of the assets the fund holds – in this case, gold and BTC. This inverse volatility will be tracked by the Vinter Bytetree Bold1 Inverse Volatility Index.
Are gold and Bitcoin a good hedge against inflation?
Gold has been considered a store of value in times of high inflation for centuries and it has also been deemed a safe-haven asset when the situation in the financial markets gets a little bit out of hand.
Bitcoin shares many of these characteristics that make gold such an appealing investment such as its durability as the network that powers the digital asset has been designed to last thousands of years as long as there are “miners” that would like to be rewarded for processing transactions.
BTC can also be easily divided into Satoshis (its lowest denomination) and the asset is also considered fungible (one BTC is exactly the same as the other). It can also be stored cheaply either in a hot or cold crypto wallet.
These and other characteristics are the reason why BTC has been deemed by crypto advocates as the digital version of gold or even better as storing costs are relatively low compared to the hassles of owning and safeguarding physical gold.
BOLD is offering the possibility of owning both assets to protect an investment portfolio against a deterioration in the purchasing power of fiat currencies amid the elevated inflation readings that are currently surfacing in multiple countries around the world.
Crypto assets are highly volatile unregulated assets. Your capital is at risk.
This article was written for Business 2 Community by Alejandro Arrieche.
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