Why CGBI?
Alternative asset index
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.
Low correlation + volatility harvesting
Bitcoin is increasingly known for exhibiting low correlation with traditional asset classes. While volatile, it can potentially enhance risk-adjusted returns when proper risk management is employed.
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 crypto-market conditions, while generating superior risk-adjusted returns.
Index Methodology
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.
Download the Methodology documentIndex Constituents
The CGBI maintains a basket of Bitcoin weighted against gold. The weights between Bitcoin and gold is determined based on a weighted-risk allocation scheme.
Visit the calculation agent’s websiteIndex Performance
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Our Team
Our expert index team delivers expert research, market insights, and in-depth understanding of CGBI’s constituents.
James Butterfill
Head of Research
Max Shannon
Digital Asset Analyst
