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Winklevoss twins to offer Bitcoin ETF

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Re: Winklevoss twins to offer Bitcoin ETF

#31

Post by devingoldfish »

johnnyg wrote: post #17
quinndupont wrote: post #5

Can someone offer a non-securities person a description of what an ETF is? What is the impact on Bitcoin?

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 y…

> If everyone called it in, there would be a lot of unhappy people holding paper instead of metal.

This actually isn't true. All the physical ETFs claiming to be holding physical gold do actually hold gold for each individual share (in fact thats the only way shares can be created!). It can get confusing because people short it which can make it seem like there are more shares outstanding than there really are. But there is actual physical gold for every true outstanding share of the ETF.

Otherwise, great summary.

Re: Winklevoss twins to offer Bitcoin ETF

#32

Post by RockyMcNuts »

johnnyg wrote: post #17
quinndupont wrote: post #5

Can someone offer a non-securities person a description of what an ETF is? What is the impact on Bitcoin?

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 y…

ahem... the idea that precious metal ETF shares represent more than total known world supply is crackpot. those numbers are pretty well known and not in the same ballpark, and no one would buy ETFs if they weren't pretty confident they had the assets to back them up.

Re: Winklevoss twins to offer Bitcoin ETF

#33

Post by scotty79 »

dangrossman wrote: post #12
justincormack wrote: post #3

If you want to invest in bitcoins why not just buy some? An ETF makes no sense...

Investing in bitcoins by buying bitcoins means choosing an exchange, funding an account, holding the bitcoins, worrying about the security of the bitcoins being held by whatever exchange you've chosen or the security of whatever computer you're holding them on... Investing in a bitcoin ETF means clicking a buy button in your online brokerage account. You invest with minimal effort and minimal risk aside from your inv…

So instead of trusting bitcoins ou trust people who take bets on bitcoin price? I don't see this as improvement.

Re: Winklevoss twins to offer Bitcoin ETF

#34

Post by sneak »

jpdoctor wrote: post #27
paulsutter wrote: post #21

Surprise - a good idea from the Winklevii. The convenience of buying and selling bitcoin from the comfort of an ordinary brokerage account, and making it possible to hedge bitcoin by selling and shorting. Anyone know how to estimate whether there's enough liquidity in existing bitcoin exchages to support it, and allow them to track the price accurately in the ETF?

> Anyone know how to estimate whether there's enough liquidity in existing bitcoin exchages to support it, and allow them to track the price accurately in the ETF? Yes. The daily volume in the ETF must be a small fraction of the daily volume in the underlying asset, and it must be possible to both buy & short the underlying. So net net: An ETF is incredibly premature. This is the Winklevii taking serious advantage of…

Yeah, the whole public BTC order book on MtGox can be had right now for under $2mm USD. The other exchanges are smaller yet.

The market is very loud, but still very tiny. This will change, and it's good to start early, but I agree wholeheartedly that an ETF is premature.

This will not be the case in 12 months, though.

I think the biggest risk to a fund like this is data security. If you have more than 50k bitcoin sitting around, APT doesn't even begin to describe the measures people will take to steal your keys.

Their S1 specifically states that the fund is not holding the Sponsor company (holding the keys) liable should their proprietary Security System fail and the keys get hacked and the coins are stolen unless it was gross negligence.

This is going to be a bumpy ride for those who don't have a deep understanding of security surrounding crypto. Based on some of the technical mis-descriptions in this doc, I am tempted to speculate that they may not have the requisite understanding to fully model the threats they face. Then again, government paperwork takes months, and perhaps this is just an early step and they'll source all of that in the interim. (Hey, tall dudes: I've got 15 years of experience keeping private data away from super-determined hackers and other bad guys, and my email address is jp@eeqj.com! Get in touch!)

The filing says nothing about the details of their proprietary Security System.

Following that, the future of liquidity is a huge unknown void right now. I wouldn't be surprised if at some point in the next 12 months, there are no exchanges on which you could liquidate more than $50-$100k in bitcoin.

It's even difficult right now when everything is nominal - anyone who thinks buying a few million dollars in bitcoin is easy or simple has never even begun to try to do so.

Re: Winklevoss twins to offer Bitcoin ETF

#35

Post by etjossem »

SeoxyS wrote: post #13
justincormack wrote: post #3

If you want to invest in bitcoins why not just buy some? An ETF makes no sense...

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.

What about Dwolla comes across as semi-shady? I ask because I have an account with them, and so far they've treated me well - especially compared to the credit card alternatives.

Re: Winklevoss twins to offer Bitcoin ETF

#37

Post by sneak »

johnnyg wrote: post #17
quinndupont wrote: post #5

Can someone offer a non-securities person a description of what an ETF is? What is the impact on Bitcoin?

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 y…

> 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.

There is _tremendous_ non-market risk in ALL of buying, holding, and selling bitcoin right now.

We're talking about the kind of risk that makes price speculating in a one-of-a-kind virtual internet cryptocurrency look like t-bills by comparison. It vastly outweighs the volatility inherent in the asset.

Your money can be seized by feds on the way to the exchange. The exchange could shut down or get DDoSed. The coins could get stolen out of the exchange before you pull them out.

Ok, dodged all that. Now you've got bitcoins. Your computer could get compromised, rendering your encrypted USB keyfiles or QR printouts unhelpful. Your keys could end up on the security footage of the bank's safety deposit vault camera. Your computer could get backdoored in the months of holding, waiting for the day you load your keys back in to send the coins back to the exchange.

Selling time. You manage to keep your keys private and sign a transaction, sending your bitcoins to the exchange. Maybe they get hacked, maybe they shut down, maybe they don't presently have a partner bank in the US to send transfers out...

There is growing demand for secure and convenient access to the bitcoin market's growth. Right now it's terrible and insecure and fragmented and illiquid and risky, and that's not changing anytime soon - but it will, eventually. It must.

I don't think this ETF is that, though.

Re: Winklevoss twins to offer Bitcoin ETF

#38

Post by hkmurakami »

paulsutter wrote: post #21

Surprise - a good idea from the Winklevii. The convenience of buying and selling bitcoin from the comfort of an ordinary brokerage account, and making it possible to hedge bitcoin by selling and shorting. Anyone know how to estimate whether there's enough liquidity in existing bitcoin exchages to support it, and allow them to track the price accurately in the ETF?

If the ETF grows in size and its net asset value must assume a large fraction of the outstanding bitcoin stash or towers over the daily trade volume, we could have some issues here...

Re: Winklevoss twins to offer Bitcoin ETF

#40

Post by signed0 »

epoxyhockey wrote: post #36

Interesting to see the Bitcoin value dropping after this announcement. I wonder what is going on there..

Could also have something to do with Mt. Gox registering with the US Treasury Dept as a money services business.

http://www.coindesk.com/mt-gox-registers-with-fincen-as-a-mo...

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