Key Points
- Bloomberg has introduced two novel investment indices, BBIG and BBUG, combining Bitcoin and Gold.
- The development of these indices is timely, given the record highs of Bitcoin and Gold in 2024.
Bloomberg has recently unveiled two innovative investment indices, BBIG and BBUG, which merge Bitcoin and Gold. These indices are among the first multi-asset indices to integrate digital assets with conventional commodities.
New Investment Indices
On February 13, Bloomberg disclosed the launch of two composite Bitcoin and Gold investment indices. BBIG is an equal-weighted Bitcoin and Gold index, while BBUG also incorporates the U.S. Dollar for added security. Bloomberg has stated that customers have the ability to modify and personalize the configuration weights of the indices.
The rationale behind these indices is to harmonize Bitcoin’s growth potential with Gold’s stability. Jigna Gibb, the Head of Commodities & Crypto Index Products at Bloomberg Index Services Limited, clarified that the main investment challenge with Bitcoin is its high volatility. Therefore, they see a fundamental case for using Bitcoin and Gold together, rather than Bitcoin versus Gold.
Timely Development
The creation of these indices is opportune, as both Bitcoin and Gold achieved record highs in 2024. This has led more investors to perceive them as complementary assets in diversified portfolios. Furthermore, even though Bitcoin and Gold have historically shown almost zero correlation, they have yielded positive long-term returns. This makes their composite index a potentially beneficial diversifier for multi-asset portfolios.
Bloomberg has previously launched other crypto indices, including Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) indices. They also offer the Bloomberg Galaxy Crypto Index (BGCI), which monitors the performance of the largest and most liquid cryptocurrencies, and the Bloomberg Galaxy DeFi Index (“DEFI”), which is designed to gauge the performance of the largest decentralized finance protocols.
Correlation Between Bitcoin and Gold
Historically, Bitcoin and Gold have shown nearly zero correlation. However, as pointed out by crypto analyst Daink, Bitcoin tends to eventually mirror gold’s movements after periods when they’ve diverged or moved in opposite directions. He explained that whenever Gold diverges from BTC, BTC eventually catches up.
Essentially, if gold significantly moves in one direction, Bitcoin may follow suit at a later stage, adjusting its price as if it’s “catching up” to gold’s momentum. Thus, while the correlation between Bitcoin and gold might fluctuate and often be near-zero (indicating no immediate relationship), it seems that Bitcoin aligns with gold’s movements after a while, demonstrating a latent correlation that doesn’t appear in real-time.
