This Upcoming ETF Hedges Both Bitcoin And Gold Against Inflation

Fund manager 21Shares is set to launch a new exchange-traded product (ETP) that will track both Bitcoin and Gold under one instrument. The ETP is set to begin trading on the SIX Swiss Exchange this week.

The ETP, called the 21Shares Bytree BOLD ETP, is a collaboration between 21Shares and digital assets manager Bytree. According to the ETP’s website, the product seeks to serve as an inflation hedge by tracking an index that has risk-adjusted exposure to both Bitcoin and gold.

21Shares, which already offers ETPs tracking several major cryptocurrencies, says Bitcoin is gold’s digital equivalent as a store of value.

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.

But this also comes in the wake of Bitcoin failing to keep up with inflation in 2022.

ETP appears to be weighted mostly towards gold

The product’s factsheet shows that it will have about $2.5 million assets under management, although nearly 84% of its holdings will be skewed towards gold. Initially, the ETP will hold roughly 10 Bitcoin tokens at a total value of $409,854.

But the fund will rebalance regularly with a bias towards the less risky asset. This implies that the fund’s BTC holdings could increase if the token performs better.

We are making bitcoin an acceptable asset to hold and bringing gold into the 21st century

Charlie Morris, chief investment officer of ByteTree, told The Financial Times.

The move comes amid growing institutional interest in Bitcoin, which has invited ETPs from several other providers. 21Shares itself manages spot ETPs tracking several popular altcoins such as Cardano, Polkadot and Fantom.

Bitcoin has failed as an inflation hedge

Bitcoin’s performance in 2022 has largely questioned its role as an effective inflation hedge. The token saw large swings on macroeconomic cues, and is currently down nearly 17% for the year. By comparison, U.S. consumer price inflation is at 8.5%. Eurozone inflation also hit 7.8% in March.

While Bitcoin has performed better than some major Wall Street stocks, it has all but failed to surpass, or even match inflation. By comparison, gold is up 4%, having benefited from safe-haven demand.