Topic: Bitcoin on the public markets? (Read 1997 times)

   I'd heard about this, but it all seems to be open to investors who are throwing down amounts in the six figure range... I would like to invest in bitcoin companies too, but on a more modest scale. I think if a dedicated virtual currency fund could make an ipo it would take off and get bitcoin a lot of good press.

  I think the question, from the standpoint of the bitcoin community is a valid one, and the question is not if such a fund would be viable. If one such fund is established and profitable, more will follow. The question then, is what exposing bitcoin to the whims of the mass market will do to bitcoin as a political and philosophical project.
     As a newcomer to the bitcoin community, I got very excited about the idea and immediately wanted to invest. The first thing I did was see if any of the venture capital firms investing in bitcoin startups trade on the NYSE. There is no dedicated bitcoin investment fund, probably because the market is simply still too small to cover the cost of trading on such an exchange, as Death and Taxes pointed out.
     From my standpoint as a believer in bitcoin, I think the more mainstream exposure the better. I am confident that the developer community will find ways to keep bitcoin one step ahead of regulators, even if the libertarian faction eventually becomes a drop in the bucket. I mean to say, I don't think mainstream exposure will ultimately have consequences in terms of the freedom that bitcoin brings to monetary transactions, and increasing the user base will probably increase bitcoin's vitality.
 I am no expert in the financial industry, but I believe hedge funds keep a small percentage of their portfolios open to invest in high risk endeavors. I think that a wall street bitcoin IPO of some kind is inevitable, and I think when it happens it will be huge. It seems to me there is a great deal of capital that is eager to get into bitcoin, and once standard channels are opened for that capital to flow into bitcoin, things will get very interesting.
    It might seem that a value increase on the scale that allowing capital to flow unimpeded into bitcoin might generate would put the deflationary counter argument to bitcoin to the test. I think that at that point bitcoin might be held as a store of value and simply transferred into litecoin or other alternate currencies that are easier to use for day to day purchases, because the use value of bitcoin is not going to go away even if people try to hoard them. Hoarding will eventually lead to a collapse in prices and a subsequent sell off and buyback. Furthermore, Krugman's argument comparing bitcoi to a D.C. babysitting cooperative ignores the fact that a babysitting cooperative doesn't have the potential to revolutionize global trade and render economic sanctions as a policy instrument all but obsolete.
     So from my limited experience and now having a significant vested interest in bitcoin on both economic and ideological grounds, I would say bring it on.

What would be the best way of accumulating this much BTC without driving the price through the roof?

Quoted for reference. To me it sounds like some paper gold scammer extending into new markets, especially if there is no way to redeem the shares directly 1:1 into bitcoins proper. Like:  I am selling my 100btc perpetual position. You just send me 100btc, and I'll send you nice certificate that you can then trade further.  And I won't exchange it 1:1 back to real bitcoins because it is perpetual

This has been discussed before a few times.

The problem always boils down to: holding bitcoin does not provide any income, so there would be no way to make money with this. Potentially the fund could be actively trading bitcoins, but you would not need to have so many to make money doing that, and you have to worry about whether your active manager is actually better than the market.

I would say, if you have the connections to actually set up a financial instrument for holding bitcoins, go ahead and do it because there are plenty of people who would want to invest.

The is a very valid point.  Holding a currency does not in an of itself provide an income.  There is a limit to the number of shares that could be issued so I am curious as to how the actual execution would take place. i.e. Where is the profit in this?

This has been discussed before a few times.

The problem always boils down to: holding bitcoin does not provide any income, so there would be no way to make money with this. Potentially the fund could be actively trading bitcoins, but you would not need to have so many to make money doing that, and you have to worry about whether your active manager is actually better than the market.

Understood but missing the point.
I'm not backing this idea.  I'm asking an opinion on the idea.  i.e. If someone steps up to the plate with this as an offering would it do more harm than good to the bitcoin economy?

Also this would be traded on a major exchange just like any large company or fiund and thus subject to all the same regulations, the difference is it that it is only a holding entity for bitcoins.  I'm not sure if it would be an ETF, or how it would be structured, that would sort of be irrelevant to the question at hand I think.
As far as being paper BTC, it should be pretty easy to verify if they are still holding those bitcoins and I'm sure most folks would know immediately if & when they sell them, but I'm not certain if selling is an option, my understanding would be a buy and hold but that is subject to change.

If a major player steps in and tries to but BTC on a primary market (likely through acquiring BTC and holding it in an entity), would this be a bad thing or a good thing.  Yes or No and Why?

Quoted for reference. To me it sounds like some paper gold scammer extending into new markets, especially if there is no way to redeem the shares directly 1:1 into bitcoins proper. Like:  I am selling my 100btc perpetual position (that I won't exchange 1:1 to real bitcoins because it is perpetual). You just send me 100btc, and I'll send you nice certificate that you can then trade further...

The only issue is one of scale.

To get a new company/entity on the pinksheets costs about $200K to $500K (yes you can do reverse mergers but that can be financial nightmares).  To get an entity (say an ETF or simply a BTC holding company) on a major exchange is going to cost $10M.  Plus there is going to be operating overhead expect $500K or so a year (minimal).    So given these large and relatively fixed costs structures the entity would need to be very large.  210K BTC might make sense for some pinksheet listing but on a major exchange unless you want the overhead to be 30%+ you are more like looking at 2M BTC.

Still if you know people with $25M to $250M, the expertise to get a public offering on a major exchange, and the time commitment to see it done (expect 6 months for a pinksheet and 2-3 years for major exchange) there is nothing that prevents it from happening.

I've been working on A LOT of bitcoin related ventures lately.  Some pan out, some don't.  That's the way life goes.
During all of this I have met and talked to numerous people from all walks of life and have of course been evangelizing bitcoin the whole time.

I made some interesting contacts one of whom is a decision maker for a largish financial institution.  
When I told him about bitcoin a year or so ago he was excited but very, very skeptical about it.  
He has been paying attention to everything that has happened lately and he contacted me today to bounce an idea off me that frankly I'm not sure how I feel about and thought I would share the idea here to see what people think.

Now understand that this is not rumor, or speculation.  
There is a very good chance that this won't occur and I'm not offering nor am I able to offer any sort of opportunity.  
This is not some sort of insider information and if the price of bitcoin takes a jump after this it will probably kill the idea off.  
This is not an announcement it is merely a hypothetical.  I am just asking the folks who would be most impacted by it, what they think of the idea.
Also you should be aware that I am not in a paid consulting position, he just views me as an SME and asked my honest opinion.  
I am having trouble forming one, so I'm asking you folks.
Should I say, "Yeah cool, good idea you should look into it." or "This is a bad idea and will only cause harm."

The underlaying concept is basically a basket of assets that are bundled into a holding structure of some sort and traded as a single stock on a stock exchange.
The core idea is to accumulate 210,000 BTC. (probably through a series of bulk purchase agreements with established operators).
(He originally said 10M but I tried to explain why that wasn't feasible, even 210,000 would be a bit of a stretch).
You then create an entity and assign it ownership over the BTC.
The entity will own this basket of currency and it represents a total 1% of the bitcoins that will ever be mined.  
(An alternative could be to purchase 1% of the currently available BTC and then try and keep up, but I think upfront is better).

It believe the goal would be simply to hold all of that BTC in perpetuity.
Then you just place the entity on a major exchange and let it trade freely.
Ideally this should cause the entity to trade at it's NAV, which is entirely comprised of BTC thus giving us a total market valuation of BTC.

In my mind this gives an instant way of calculating the value of BTC on the open market and allows people to hold BTC in their IRAs or 401Ks without unduly limiting the supply and creating a hoarding situation, or trading the BTC rapidly which lengthens the block chain needlessly.  When people are ready to cash out their holdings they can do so as easily as selling Ford or Coca Cola stock.  Major players could liquidate without crashing the price of BTC for the rest of us.

The disadvantage I see is that this locks up an awful lot of bitcoin into the hands of a single company.  Still that may not be a bad thing since the interests of the company are solely in keeping the price of BTC stable and gradually appreciating.

So my question is this.  If a major financial institution were to consider actually backing this thing properly , ensuring that it is fully registered, fully compliant, no different than any other publicly traded entity.
  
Would you consider it a good thing or a bad thing for bitcoin?  Why?
Would you buy?  Would you sell your bitcoins to buy once it reaches the market? Why or Why Not?
What would be the best way of accumulating this much BTC without driving the price through the roof? (legitimate question because I don't think there are 210,000 BTC liquid right now).

Thanks!

Protip: If you're thinking about buying 210k bitcoins in the near future don't tell everyone about it.