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Winklevoss twins to offer Bitcoin ETF

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Re: Winklevoss twins to offer Bitcoin ETF

#91

Post by nivertech »

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?

I didn't read the SEC filling. But there are 2 major kinds of ETFs: those which trying to accurately track the index and those which tracking daily movements (usually leveraged). Many ETFs tracking commodities are of the second type, so buy&hold investors will lose money by buying them.

Re: Winklevoss twins to offer Bitcoin ETF

#92

Post by anizan »

Lets see the benefit of ETF here Impact costs will be higher esp when Bitcoin doesnt have traditional market depth sources like arbitrage Its wallet will be a bigger target than yours for cyber criminals and would atleast get 10000x more attack attempts on it both virtually and physically. Also your holdings will no long anonymous as you're registered under the ETF with your exact holding.

In summary makes sense if your lazy and innovation is all about letting people be lazy

Re: Winklevoss twins to offer Bitcoin ETF

#93

Post by Nursie »

sneak wrote: post #68
clarkmoody wrote: post #66

Earlier quoted context omitted.

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.

Theoretically I think the 51% attack basically allows you to control the direction of the blockchain.

At that point you could make a slightly different client run on your 51% and do things like (for instance) change the BTC generation rates and cap. Most likely at that point the people running the remaining 49% would find a way to ignore you, or fork the blockchain though.

Re: Winklevoss twins to offer Bitcoin ETF

#94

Post by Uperte »

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?

"Someone on one of Team Macro Man's chats recently described this ETF as a Rorschach test of what people think of digital currencies. That is utterly wrong: it's an IQ test. Bitcoin is anonymous, untaxed (for now) and quite liquid in and of its own right despite all the complexities of a cryptocurrency. A bitcoin ETF is taxed, has fees, may or may not be liquid at all. So, this is really a test: do you want to facilitate the exit of the Winkelvii from an investment at inflated levels which they will soon be taxed upon or do you want to sit this hand out? "

Macro-man gets it.

Re: Winklevoss twins to offer Bitcoin ETF

#95

Post by jpdoctor »

RockyMcNuts wrote: post #86
jpdoctor wrote: post #72

It's clear that many folks don't understand how the price dynamics of ETFs with underlying securities operate. A share in an ETF is a fixed basket of securities. If the price of the ETF differs from the basket, the ETF share creation/redemption mechanism drives the price back to the fair-market value of the basket. If the price of the ETF share is too high: Market participants will short the ETF and buy the underlyin…

not sure I agree with your detective work. If the price of the ETF is too low... you can buy the ETF, take it to the ETF sponsor, they will convert it into the underlying, you can then sell the underlying. Ability to short = ability to borrow. If you can borrow Bitcoins from someone, you can sell them, and then you're short. While there may not be an active lending market, in principle no reason it couldn't be done.…

> in principle no reason it couldn't be done.

I'm not suggesting otherwise. I am pointing out that a genuine, fast mechanism for shorting needs to be available in order for the ETF price to track the underlying. That mechanism will take quite a while before there is enough confidence for market participants to have faith in the ability to short.

Re: Winklevoss twins to offer Bitcoin ETF

#96

Post by jpdoctor »

sneak wrote: post #88
jpdoctor wrote: post #72

It's clear that many folks don't understand how the price dynamics of ETFs with underlying securities operate. A share in an ETF is a fixed basket of securities. If the price of the ETF differs from the basket, the ETF share creation/redemption mechanism drives the price back to the fair-market value of the basket. If the price of the ETF share is too high: Market participants will short the ETF and buy the underlyin…

If I'm reading this right, doesn't that mean a "basket" at a time, or 10k BTC increments?

Yes, I didn't want to complicate the issue. In order to keep the admin costs low, the ETF demands that blocks of shares be redeemed at once. (for example: The gold ETF GLD requires 50K shares be created/redeemed at once, iirc.)

Re: Winklevoss twins to offer Bitcoin ETF

#97

Post by RockyMcNuts »

jpdoctor wrote: post #95
RockyMcNuts wrote: post #86

Earlier quoted context omitted.

not sure I agree with your detective work. If the price of the ETF is too low... you can buy the ETF, take it to the ETF sponsor, they will convert it into the underlying, you can then sell the underlying. Ability to short = ability to borrow. If you can borrow Bitcoins from someone, you can sell them, and then you're short. While there may not be an active lending market, in principle no reason it couldn't be done.…

> in principle no reason it couldn't be done. I'm not suggesting otherwise. I am pointing out that a genuine, fast mechanism for shorting needs to be available in order for the ETF price to track the underlying. That mechanism will take quite a while before there is enough confidence for market participants to have faith in the ability to short.

I guess I would say a genuine, fast mechanism for price discovery and liquid trading Bitcoin long and short needs to be available.

As long as the ETF sponsor stands by to exchange the ETF for Bitcoin and vice versa, shorting isn't really required.

If it were a closed-end-fund with no exchanges for the underlying, then you would need ability to borrow/short.

Re: Winklevoss twins to offer Bitcoin ETF

#98

Post by RockyMcNuts »

justincormack wrote: post #3

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

plus it turns an underground darknet into something taxable!

thus fully transforming an anti-establishment force into a plaything for speculation and extraction for the 1%.

Re: Winklevoss twins to offer Bitcoin ETF

#99

Post by Techskeptic »

This is a case of selling the shovels to gold miners. This is only a way for them to unload their 11mm position in Bit coin to a greater fool. Once the Feds determine that Bit coin is a money laundering service, all these shares will be worthless. If you aren't smart enough to trade actual Bit coins, why would you buy a derivative of one?

Re: Winklevoss twins to offer Bitcoin ETF

#100

Post by smoorman1024 »

anonymoushn wrote: post #59
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…

I expect we'd see more liquidity on MtGox if they figured out how to write a matching engine. I would never add liquidity on a venue that routinely takes hours to process orders and cancels.

I have had a theory that most traditional matching engines can get away with lower latencies because they can multicast their marketdata.

It seems like sending out all marketdata events to each connected user over a tcp connection is bound to be problematic.

Perhaps they will add a collocation site where active Market Makers could receive multicasted marketdata with much lower latencies.

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