In an innovative move that could reshape the investment landscape, Tidal Investments and Quantify Chaos Advisors have jointly proposed a novel Exchange-Traded Fund (ETF) that aims to combine the allure of gold with the modern appeal of Bitcoin.
This new financial product, named the STKD Bitcoin & Gold ETF, seeks to offer investors leveraged exposure to both assets, providing a unique blend of traditional and digital investment opportunities.
The primary goal of the STKD ETF is to give investors exposure to the returns of both bitcoin and gold without needing to purchase the assets directly.
This is achieved through the use of leverage, which effectively “stacks” the returns of bitcoin and gold strategies on top of one another. According to the prospectus filed with the U.S. Securities and Exchange Commission (SEC):
“One dollar invested in the Fund provides approximately one dollar of exposure to the Fund’s Bitcoin strategy and approximately one dollar of exposure to the Fund’s Gold strategy.”
The gold strategy’s returns (after subtracting financing costs) are added to the bitcoin strategy’s returns (also after subtracting financing costs). The underlying funds can achieve exposure to these asset classes either directly or through derivatives like futures contracts.
This innovative approach is designed to capitalize on the low correlation between bitcoin and gold. Historically, these two assets have not moved in tandem, which means their price movements are relatively independent of each other.
By blending these uncorrelated assets, the ETF aims to reduce the impact of short-term market fluctuations, potentially offering a more stable investment trajectory.
Related: Bitcoin vs Gold | Why All Investors Need to Own Both
Bitcoin, often referred to as “digital gold,” has gained popularity as a store of value. Despite its higher volatility compared to gold, bitcoin has delivered substantial returns over the past decade.
On the other hand, gold is traditionally viewed as a safe-haven asset, particularly during economic downturns, due to its perceived stability.
The combination of these two assets is seen as a way to balance the high volatility of bitcoin with the stability of gold. This combination aims to provide complementary benefits. The filing noted:
“By blending assets with low correlation, the Fund aims to reduce the impact of short-term market fluctuations on the overall investment outcome, potentially providing a more stable investment trajectory.”
The STKD Bitcoin & Gold ETF does not invest directly in bitcoin or gold. Instead, it gains exposure through Bitcoin futures and ETFs, as well as gold futures and ETFs.
This indirect method allows the fund to avoid the complexities and regulatory hurdles associated with holding the actual assets.
The proposal for the STKD Bitcoin & Gold ETF comes at a time when Bitcoin ETFs are gaining traction in the broader financial world.
The introduction of traditional spot Bitcoin ETFs has seen significant inflows, indicating a growing appetite among investors for regulated exposure to the scarce digital asset.
Despite the excitement surrounding this new ETF, there are still regulatory hurdles to clear.
The SEC has historically been cautious about approving Bitcoin ETFs due to concerns about market manipulation and volatility. However, the success of existing spot Bitcoin ETFs might pave the way for more innovative products like the STKD ETF.
The filing for the STKD ETF has set an effective date of September 9, 2024, but it still requires approval from the SEC before it can be launched. The regulatory scrutiny is expected to be intense, but if approved, the STKD ETF could become a significant addition to the ETF market.
Henry Jim, a renowned analyst from ETF Hearsay, shared insights on this groundbreaking proposal.
He highlighted the strategic use of leverage in the STKD ETF, noting that it “employs leverage to stack the total return of holdings in the Fund’s Bitcoin strategy with the total return of holdings in the Fund’s Gold strategy.”
The introduction of the STKD Bitcoin & Gold ETF could have broader implications for the financial markets. By offering a product that combines traditional and digital assets, Tidal Investments and Quantify Chaos Advisors are pushing the boundaries of innovation in the ETF space.
This move could also signal a shift in how investors perceive and interact with both gold and bitcoin. By blending these assets into a single investment vehicle, the STKD ETF could attract a wider range of investors, from those seeking the stability of gold to those drawn to the high returns of bitcoin.
