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Winklevoss twins to offer Bitcoin ETF

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Re: Winklevoss twins to offer Bitcoin ETF

#61

Post by [deleted] »

swishercutter wrote: post #55
sneak wrote: post #48

Earlier quoted context omitted.

> But you can be sure that if you tried to do this, a lot of other sell orders would pop up, making it effectively impossible to buy up all bitcoins. Yes, at entirely reasonable prices, right? :D A substantially higher cost basis starts to cut into fund profits... Also, a minor correction to your comment: the depth of the MtGox order book is public, and it was accurate at the time of my comment. It's up to $2.2mm USD…

Does the order book show all the "dark pool" trades? It surely cannot show all those who sit and wait (or have bots) for the price to change so they can move their ask price up.

[deleted]

Re: Winklevoss twins to offer Bitcoin ETF

#64

Post by sneak »

jpdoctor wrote: post #43
sneak wrote: post #34

Earlier quoted context omitted.

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 sit…

> Following that, liquidity. There needs to be an effective method of shorting in order for the ETF to be effective. I think it will take much more than a year.

I don't follow that logic, could you explain it?

Re: Winklevoss twins to offer Bitcoin ETF

#65

Post by trotsky »

scarletham wrote: post #63
trotsky wrote: post #60

What exchange is going to list a fund that trades an unregulated market? The potential for manipulation is off the charts.

GLD, the largest gold based ETF, holds bullion. Gold bullion trades in the unregulated OTC markets.

There are plenty of US regulations that apply to gold: purity, weight standards, futures regulations, security standards, etc. And i'd be pretty surprised if they didn't trade through COMEX or use them or someone similar for clearance or bonded storage.

Re: Winklevoss twins to offer Bitcoin ETF

#66

Post by clarkmoody »

sneak wrote: post #49
7Figures2Commas wrote: post #45

A few interesting things to note: 1. The trust sponsor is wholly-owned by Winklevoss Capital Management LLC. 2. The sponsor is licensing intellectual property from Winklevoss IP LLC. 3. The fee has not yet been determined. Fees are often waived for a period of time with new issues but according to the prospectus, "Presently, the Sponsor does not intend to waive any of its fee." 4. The fee is paid via a transfer of bi…

The thing that really jumped out at me was the proprietary "Security System" for holding keys developed by Winklevoss IP LLC and licensed to the Sponsor. ...and the fact that the Sponsor is not liable for security-related losses except in the case of gross negligence, which I don't imagine would cover advanced theft/hacking. (I am not a lawyer.) Something close to 10% of all bitcoin currently in circulation have been…

One would hope that an entity with enough capital invested in lawyers to draft an SEC filing would have to good sense to properly secure a Bitcoin wallet.

Re: Winklevoss twins to offer Bitcoin ETF

#67

Post by unclebucknasty »

vijayboyapati wrote: post #26

If this works out, it'll provide a great mechanism for price discovery to happen outside of the scope of exchanges. The ETF price will act as a proxy for the bitcoin price. One of the worst aspects on the crackdown on MtGox has been the hampering of price discovery and liquidity. Dollar prices, in particular, vary greatly across exchanges and this is a sign that the market is still deeply illiquid.

I don't understand how this would be the case. Not challenging your assertion. I literally don't understand.

My understanding was that ETFs are usually intended to track the underlying commodity, not the other way around. In fact, they are frequently backed by the commodity itself of course (sometimes leveraged. Sometimes not).

So, to that extent pricing should still be pegged to Bitcoin, which would mean that supply and demand on the exchanges should be the biggest determinants of price/discovery. If anything, an ETF would seem to obfuscate the price given the difficulty of tracking the underlying commodity that can occur with some ETFs.

So, in my mind, for an ETF to even accurately track the commodity, the liquidity, price discovery, and other market mechanisms for efficient trading of that commodity itself must already be in place. Only then would the ETF serve as a proxy. Otherwise, layering another abstraction would seem to add more confusion than clarity.

Re: Winklevoss twins to offer Bitcoin ETF

#68

Post by sneak »

clarkmoody wrote: post #66
sneak wrote: post #49

Earlier quoted context omitted.

The thing that really jumped out at me was the proprietary "Security System" for holding keys developed by Winklevoss IP LLC and licensed to the Sponsor. ...and the fact that the Sponsor is not liable for security-related losses except in the case of gross negligence, which I don't imagine would cover advanced theft/hacking. (I am not a lawyer.) Something close to 10% of all bitcoin currently in circulation have been…

One would hope that an entity with enough capital invested in lawyers to draft an SEC filing would have to good sense to properly secure a Bitcoin wallet.

The SEC filing claims that a 51% attack could somehow modify the source code. Obvious errors like that make it seem rushed.

It can't be solved by just throwing money at the problem, either—it takes expertise, too. Nobody in the industry is taking (IMHO) adequate steps for protecting keys worth >$500k presently.

Re: Winklevoss twins to offer Bitcoin ETF

#69

Post by 7Figures2Commas »

clarkmoody wrote: post #66
sneak wrote: post #49

Earlier quoted context omitted.

The thing that really jumped out at me was the proprietary "Security System" for holding keys developed by Winklevoss IP LLC and licensed to the Sponsor. ...and the fact that the Sponsor is not liable for security-related losses except in the case of gross negligence, which I don't imagine would cover advanced theft/hacking. (I am not a lawyer.) Something close to 10% of all bitcoin currently in circulation have been…

One would hope that an entity with enough capital invested in lawyers to draft an SEC filing would have to good sense to properly secure a Bitcoin wallet.

One would hope that an entity with enough capital invested in lawyers to draft an SEC filing would have the good sense to know where its clients money is at all times. Oh wait... http://www.forbes.com/sites/jakezamansky/2011/11/15/mf-globa...

Re: Winklevoss twins to offer Bitcoin ETF

#70

Post by [deleted] »

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?

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