A Comparative Study of Bitcoin and Commodity Markets
Peebles, John
Peebles, John
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2025-05-19
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Abstract
This research study investigates the performance, risk, liquidity, and diversification benefits of Bitcoin Exchange-Traded Funds (ETFs) relative to commodity ETFs. This study addresses three overarching questions: How do Bitcoin ETFs and commodity ETFs compare in terms of performance, risk, and liquidity? Can Bitcoin ETFs and commodity ETFs provide diversification to a portfolio of assets? Is Bitcoin a viable alternative investment vehicle? All the data gathered and analyzed in this study is quantitative, with Bloomberg being the source. To assess performance of the ETFs, historical price data is leveraged to calculate standard deviations, Sharpe ratios, Sortino ratios, maximum drawdowns, Value at Risk (VaR), and expected shortfall. Liquidity is assessed using proportional bid-ask spreads and total trading volume. To determine diversification benefits, four portfolios are constructed with varying combinations of Vanguard?s Total Stock Market ETF (VTI), Vanguard?s Total Bond Market ETF (BND), Bitcoin ETFs (GBTC and IBIT), and commodity ETFs (AAAU, SLV, USO, and DBA). Portfolio performance is compared using risk-adjusted return metrics and optimization to determine optimal asset allocations. Additionally, regressions are conducted between Bitcoin ETFs and commodity ETFs to determine the relationship between the two and how Bitcoin ETFs compare to more traditional alternative asset classes.