Winklevoss twins to offer Bitcoin ETF

Because that would allow larger, regulated funds (like pensions and university endowments) to invest in them, as they're generally restricted to securities listed on credible exchanges.

Good news for bitcoin owners, as that means more potential buyers and thus a higher price.

I am a bit worried though, about workers who may lose out because a manager got too caught up in the hype.

Buying shares on a publicly traded and regulated market (like NYSE), through your usual stock broker, would be a lot safer and more convenient for many investors than the current options available for investing into bitcoin. You don't have to worry about the unreliable exchanges, and semi-shady payment processors like Dwolla.

It's a fund that invests in Bitcoins that trades like a stock on the stock exchange. If I'm reading this correctly, one share will represent 0.2 Bitcoin.

A normal, unleveraged, passive ETF represents an underlying investment or basket of investments, like gold or the S&P 500, or in this case, Bitcoin.

At any point, people can go to the sponsor and exchange the underlying for the ETF. So if the price gets out of whack with the underlying, people step in and buy one and sell the other, to bring prices back in line.

So it has a lot of the benefits of publicly traded stock, easy/cheap to trade, put in your brokerage account etc.

It does add a layer of fees (not specified yet as far as I see in prospectus on p. 40). You can just buy Bitcoin yourself, you avoid the fees, but investment advisors, retirees, may find it worth the usually small fee (like 0.1% for the SPY, probably not quite that low for this ETF).

ETFs, used properly, are great - liquidity, tax efficiency, ultra low cost.

However, as Gandhi said, "The greater the institution, the greater the chances of abuse."

The problem here is, if the underlying Bitcoins are illiquid, in a volatile market, the price of the ETF can diverge a lot from the price of the underlying.

Basically, unless you know what you're doing

- Stick with big sponsors, like Vanguard, iShares, State Street (SPDRs)

- Index ETFs only (not actively managed)

- No leveraged ETFs

- Liquid underlying securities, actively traded ETFs (e.g., probably doesn't apply to this ETF)

Overview:

An Exchange Traded Fund or ETA was originally a way to buy an index or basket of funds.

Say you wanted to buy Standard and Poor's top 500 stocks. As an individual investor, you'd would need a lot of money and would pay a lot of fees to buy up all 500. Then if some stocks were added and others were removed from the index, you would have to pay to get in and out of those.

Enter the ETF ticker symbol SPY. If you buy it, you own a single stock that reflects the composite value of the Standard and Poor's top 500.

ETFs are generally cheaper than mutual funds.

Common ETFs:

DIA is the Dow Jones index, it is only the biggest/"safest" blue chips.

RUT is the Russel 2000 which is a larger number of smaller than SPY stocks.

There are now ETFs for everything. GLD for gold, SLV for silver. I'm pretty sure if you wanted to buy cows via ETFs you could do it.

ETF Negatives:

There is a lot of debate on the precious metals ETFs because there is a LOT more paper being traded than known world supply of Gold or Silver. If everyone called it in, there would be a lot of unhappy people holding paper instead of metal.

My opinion on a bitcoin ETF:

Bitcoin is bitcoin. Unless you want to say that you are starting an ETF that represents a diverse amount of exchanges and in so doing lowers spread risk, then there is really no technical reason for this ETF being founded.

However, if you think that the less technically savvy stock traders in the world might not be able to buy bitcoin because they do not know how but do know how to trade stocks, then you could act as an easier means to the value store they wish to hold.

This is likely what they are up to, and I think it'll work for a while.

> ...minimal risk aside from your investment losing value.

Classic.