The Vinter ByteTree BOLD Index
The ByteTree BOLD index comprises bitcoin and gold, and rebalances monthly according to the inverse historic volatility (360-day) of each asset.
Investment Objective
BOLD aims to deliver protection against inflation, giving optimal risk-adjusted exposure to bitcoin and gold.
The ByteTree BOLD index comprises bitcoin and gold, and rebalances monthly according to the inverse historic volatility (360-day) of each asset.
For example, if the historic volatility of bitcoin is 38% and the historic volatility of gold is 12%, the weightings of bitcoin and gold in the portfolio will be 25% and 75% respectively.
BOLD has been licensed to underlie financial products.
Why BOLD?
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 historic 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
Gold and bitcoin provide diversification to a balanced portfolio. BOLD offers investors a convenient way to invest in gold and bitcoin, in a structure that prudently manages risk. Rebalancing transactions are carried out within a tax efficient structure.
Key Features
| Liquidity | LiquidityGold is one of the most liquid assets in the world, trading $150bn per day according to the World Gold Council. Bitcoin is a younger asset, with growing on-chain transactions of over $6bn per day (bytetree.com). |
| Volatility | VolatilityBOLD volatility has been approximately that of the US 10-year Treasury Inflation Protected Securities (TIPS). |
| Diversification | DiversificationBitcoin and gold are the highest quality “hard assets” in the digital and real worlds respectively. Hard assets are deemed to protect investors from inflation. Both assets are deemed to be inflation-sensitive, gold has tended to perform best when long-term interest rates are falling in risk-off conditions. In contrast, Bitcoin has tended to prefer “risk-on” conditions when long-term interest rates rise. Hard assets tend to fall in value when inflation is low. |
| Risk | RiskBOLD is expected to have a slightly higher risk than gold, and materially lower risk than Bitcoin. |
| Drawdown | DrawdownThe BOLD index has demonstrated a much lower drawdown risk profile than pure bitcoin. BOLD’s maximum drawdown over the period Nov 2014 - Nov 2021, was 16% - around 20% of that experienced by bitcoin. |
| Rebalancing | RebalancingBOLD is rebalanced on the first day of each month. By automatically adjusting weightings the rebalancing aims to smooth and enhance combined returns over time. |
Gold and Bitcoin Weightings
The ByteTree BOLD index tracks the performance of a portfolio that contains bitcoin and gold. BOLD is designed to be a conservative way to blend these two assets. Asset allocation is determined by 360-day volatility. Generally speaking, volatile assets are deemed to be riskier than stable assets.
Given gold has materially lower volatility than bitcoin, the result is a consistently higher exposure to gold, and a lower exposure to bitcoin. The bitcoin weight has been highest when its volatility has enjoyed periods of calm and vice versa.
Gold’s highest 360-day volatility was 50% in 1980 and lowest was 6% in 1996. The 50-year average has been 17.8%. Bitcoin’s highest 360-day volatility was 170% in 2011 and lowest was 42% in early 2017. The 10-year average has been 85%, with the 5-year average, 64%.
As a result, the bitcoin weight is likely to range between 10% to 30% at the time of rebalancing, with the gold weight ranging between 70% and 90%. In the period between rebalancing, this weight can vary according to market price moves. For example, if bitcoin falls, while gold remains stable, the bitcoin weight would fall, and gold’s weight would rise. This would be brought back into line at the month end.
The weighting methodology is called “inverse volatility”. The less volatile asset gets the highest weight. The "Constituent Weights" tables show what the weights would be given different levels of volatility for bitcoin and gold.
Constituent weights in the BOLD Index
Gold
| Bitcoin Volatility | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 10% | 20% | 30% | 40% | 50% | 60% | 70% | 80% | 90% | 100% | ||
| Gold Volatility | 10% | 50% | 67% | 75% | 80% | 83% | 86% | 88% | 89% | 90% | 91% |
| 15% | 40% | 57% | 67% | 73% | 77% | 80% | 82% | 84% | 86% | 87% | |
| 20% | 33% | 50% | 60% | 67% | 71% | 75% | 78% | 80% | 82% | 83% | |
| 25% | 29% | 44% | 55% | 62% | 67% | 71% | 74% | 76% | 78% | 80% | |
| 30% | 25% | 40% | 50% | 57% | 63% | 67% | 70% | 73% | 75% | 77% | |
| 35% | 22% | 36% | 46% | 53% | 59% | 63% | 67% | 70% | 72% | 74% | |
| 40% | 20% | 33% | 43% | 50% | 56% | 60% | 64% | 67% | 69% | 71% | |
| 45% | 18% | 31% | 40% | 47% | 53% | 57% | 61% | 64% | 67% | 69% | |
| 50% | 17% | 29% | 38% | 44% | 50% | 55% | 58% | 62% | 64% | 67% | |
Bitcoin
| Bitcoin Volatility | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 10% | 20% | 30% | 40% | 50% | 60% | 70% | 80% | 90% | 100% | ||
| Gold Volatility | 10% | 50% | 33% | 25% | 20% | 17% | 14% | 13% | 11% | 10% | 9% |
| 15% | 60% | 43% | 33% | 27% | 23% | 20% | 18% | 16% | 14% | 13% | |
| 20% | 67% | 50% | 40% | 33% | 29% | 25% | 22% | 20% | 18% | 17% | |
| 25% | 71% | 56% | 45% | 38% | 33% | 29% | 26% | 24% | 22% | 20% | |
| 30% | 75% | 60% | 50% | 43% | 37% | 33% | 30% | 27% | 25% | 23% | |
| 35% | 78% | 64% | 54% | 47% | 41% | 37% | 33% | 30% | 28% | 26% | |
| 40% | 80% | 67% | 57% | 50% | 44% | 40% | 36% | 33% | 31% | 29% | |
| 45% | 82% | 69% | 60% | 53% | 47% | 43% | 39% | 36% | 33% | 31% | |
| 50% | 83% | 71% | 63% | 56% | 50% | 45% | 42% | 38% | 36% | 33% | |
Current weights as at June 2024: Gold 75.74%, Bitcoin 24.26%.
Documents
Index Components
| Index name | Vinter ByteTree BOLD1 |
| Methodology | 360-day inverse volatility |
| Launch date | 1 October 2014 |
| Calculator | Vinter |
| Dissemination | Daily |
| Type | Multi-asset |
| Currency | US$ |
| Rebalance frequency | Monthly |
| Bloomberg | BOLD1 |
| Refinitiv | BOLD1 |
| Reuters | .BOLD1 |
BOLD ETP
