The New ETF Hedge Tool To Protect Bitcoin And Gold Against Inflation
Popular fund manager 21Shares plans to launch another exchange-traded product (ETP) that tracks funds reserves like Bitcoin and Gold under the same instrument. The new ETP will be listed on the SIX Swiss Exchange platform later this week.
The latest ETP is named the 21Shares ByteTree BOLD, a partnership between 21Shares and Bytree, a digital asset manager.
A statement on the ETP website disclosed that the new product is designed to serve as a measure against inflation by tracking index performance metrics with a flexible risk-adjustment exposure feature capable of functioning for both Bitcoin and gold.
Accordingly, 21Shares has already begun to offer the ETPs tracking service involving several top cryptocurrencies, adding that Bitcoin is a cryptos equivalent of gold as a store of value.
Furthermore, the firm noted that both are suitable assets to protect investors’ funds from inflations. Gold is often at its best when there is a contraction in the economy, while Bitcoin performs optimally during economic expansion.
However, the new development comes at a time when the BTC failed to impact the period of inflation that has engulfed the majority of the months of 2022.
ETP is Pegged More towards Gold
The ETP product information sheets show that it is likely to have close to $2.5 million in assets in its custody, with almost 84% of the holdings tilted towards gold. At the onset, the ETP is expected to hold about 10 BTC tokens valued at $409,854.
However, the fund is set to rebalance more often with its sentiments more attuned to the less risky assets among the two. This means that Bitcoin holdings in the ETP will increase in the event of positive performance from the token.
Charlie Morris, the chief investment officer of ByteTree, disclosed that the aim is to make Bitcoin an acceptable asset to users and bring gold closer to the people than before.
The latest development comes amid the growing institutional interest in the flagship cryptocurrency, Bitcoin, with several ETPs from various providers interested in taking the plunge with Bitcoin.
21Shares is reported to be managing spot ETPs that are tracking a handful of top altcoins like Cardano, Fantom, Polkadot, and others.
Bitcoin not Suitable as an Inflation Hedge
Among the many debates about the suitability or otherwise of Bitcoin to manage inflation is that the leading cryptocurrency has failed to exert any influence concerning price fluctuations throughout the beginning of the year.
Many have questioned the role of Bitcoin as an effective hedge in times of inflation, and it is no surprise that the token has failed to live up to its billing, just like gold has done for fiat currency.
The BTC has experienced large macroeconomic price swings, which has seen its value down by almost 17% less than five months into 2022.
The general perception is that Bitcoin has failed to surpass inflation and thus is unsuitable to serve as a hedge.
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