Can an ETF that holds both traditional and digital gold truly diversify risks with gold + bitcoin?

Tidal Investments and Quantify Funds have submitted the STKD Bitcoin & Gold ETF to the SEC, aiming to provide investors with a blend of investments in Bitcoin and gold futures and ETFs, allowing them to have exposure to both physical gold and digital gold Bitcoin in one go.

Simultaneously Holding Traditional Gold and Digital Gold ETF

The STKD Bitcoin & Gold ETF is an actively managed exchange-traded fund (ETF) that aims to achieve its investment objective through listed futures contracts in the United States and exchange-traded products (ETPs) as investment tools. According to its submitted documents, the fund will invest in two complementary asset classes, namely the modern digital asset class "Bitcoin" and the traditional asset class "Gold", and by blending these two less correlated assets, it aims to reduce the impact of short-term market fluctuations on the overall investment results, thereby providing a more stable investment trajectory.

The fund primarily invests in:

• Gold futures contracts
• Bitcoin futures contracts
• Gold ETPs
• Bitcoin ETPs
• Repurchase agreements
• Cash and cash equivalents

Due to the use of futures by the fund, leverage will be generated. If the fund has $100 in assets, the fund is expected to receive $100 in Bitcoin exposure and $100 in Gold exposure. This is similar to investing $100 in a Bitcoin strategy fund, borrowing $100, and then putting the borrowed $100 into a Gold strategy fund.

Comparison of Gold ETF and Bitcoin ETF

The world's largest Gold ETF, SPDR Gold Trust with the code GLD, has risen by 14.4% this year, with a current market value of $62.7 billion. Meanwhile, the Bitcoin spot ETF launched in January, IBIT by BlackRock, attracted the most funds and has risen by 31% year-to-date, with assets under management currently at $18.8 billion.

However, as shown in the chart below, the trends of both seem to be highly synchronized this year.