Index Strategies > CGBI

CoinShares Gold and Bitcoin Index (CGBI)

Diversified Exposure to Alternative Assets Volatility Weighting and Monthly Rebalancing Reduces Risk and Enhances Returns Superior Risk Profile Compared to Holding Gold or Bitcoin in Isolation

Source: Compass Financial Technologies. For full details refer to the CGBI Index Methodology document. The CGBI was launched in October 2021. Figures prior to this date have been derived by applying the methodology as at that date. Investors cannot invest directly in an index. Past performance is no indication of future performance.

What is the CGBI?

Alternative Asset Index

The CoinShares Gold and Bitcoin Index is a sub index of the CGCI. It follows exactly the same construction mechanisms as the CGCI except that the crypto-basket is composed of Bitcoin only rather than a basket of the top 5 cryptos.

The CGBI provides risk-managed exposure to Bitcoin without extreme volatility. The unique construction of the index leverages the characteristics of the two assets – namely the extremely high volatility of Bitcoin, the low volatility of gold, and the low correlation between the two. The index, administrated by Compass Financial Technologies, is approved as EU Benchmark Regulations (EU BMR) compliant.

Low Correlation + Volatility Harvesting

Digital assets, such as Bitcoin, are being recognized as viable investments primarily due to their low correlation with traditional asset classes which can enhance risk-adjusted returns in a wider portfolio. Although Bitcoin is highly volatile, which can present risks, there are valuable benefits employing risk management, which the CGBI employs.

Why Gold + Bitcoin?

By pairing gold and Bitcoin in a way that accounts for their risk contribution, the index delivers a risk and return profile that is superior to holding gold or Bitcoin alone.

Volatility Weighting + Monthly Rebalancing

The index employs risk control tools and a monthly rebalancing mechanism to lower volatility and strengthen the portfolios resilience to unforeseen drawdowns during stressful market conditions for bitcoin, while generating superior risk-adjusted returns.

The CoinShares Gold and Bitcoin Index

Diversified Exposure to Alternative Assets

Index Methodology

The index methodology maintains as basket of Bitcoin weighted against gold. The weights between Bitcoin and gold is determined based on a weighted-risk allocation scheme.

The index methodology was created from the research and experimentation conducted with Imperial College of London and with the EU registered benchmark administrator, Compass Financial Technologies to ensure a robust and benchmark compliant index.

Index Documents

Index Methodology
Benchmark Statement

Key Statistics

Date Tue, 25 Jan 2022
Daily Value $ 10,246.03
Annualised Return 46.78 %
Annualised Standard Deviation 0.25
Annualised Sharpe 1.87
Annualised Sortino 2.62
Return Since Inception 924.60 %
30 Day High $ 10,822.36
30 Day Low $ 9,968.19
Y-to-Y Return 14.06 %

CGBI vs Bitcoin vs Gold

The CGBI introduces an adapted version of the Shannon’s Demon theory to control and benefit from the high volatility produced by Bitcoin.

The Shannon’s Demon theory is a strategy where two uncorrelated assets -at least one of which is highly volatile (e.g. Bitcoin)- are periodically rebalanced to maintain an ideal weight allocation. We find a Bitcoin–gold weighting based on Weighted Risk Contribution to be historically more effective in terms of Sharpe Ratio than several alternative asset allocation strategies.

The resulting expected growth rate of the CGBI is greater than the individual expected growth rates, while the variance of the returns is less than the individual variances. This strategy is well suited for Bitcoin due to its volatile nature and being an uncorrelated asset class. Gold was chosen on the other hand as an ideal candidate due to being much less volatile and having displayed very low correlation with Bitcoin.

Source: Compass Financial Technologies. For full details refer to the CGBI Index Methodology document. The CGBI was launched in October 2021. Figures for the CGBI prior to this date have been derived by applying the methodology as at that date. Investors cannot invest directly in an index. Past performance is no indication of future performance. Bitcoin and Gold are rebased to 1,000 at Jan 4, 2016. Gold price is GLD price of the day before.

Constituents Weights

Source: Compass Financial Technologies. For full details refer to the CGBI Index Methodology document. The CGBI was launched in October 2021. Figures prior to this date have been derived by applying the methodology as at that date.

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The index is readily licensable with CoinShares Capital Markets and can be tracked upon request. For more information or questions about the index please complete the form below and one of our team members will reach out shortly.
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