Topic: Buy bitcoins on Nasdaq (Read 13736 times)

Agreed and I misunderstood although (possibly my reading of) your wording seems to indicate a sinister intent.


The company is able to bill the trust for the small management fee (unstated but 0.5% annually is a common amount) and the NAV will decline over time but I wouldn't call it "only they benefit".  If there is no benefit to shareholders (of the trust not the management company) then they won't buy it.  I mean it is an open market.  Investors will weigh the value/utility (if any) of the fund vs the cost (in terms of annual management fee).  They buy because the value outweighs the cost.

I would argue there is a lot of potential utility here:

* A company which had a margin brokerage account could accept BTC for goods and hedge volatility between time of acquiring and time of selling by selling short the fund.
* Speculators looking to go long could use margin to extend their leverage at lower cost and risk compared to systems like bitfinex.
* Long term holders of physical BTC (in cold storage) could sell covered calls against the fund for USD cashflow without needing to periodically sell off BTC on exchanges of unknown risk.
* Buying calls and puts would be a more sophisticated way of trading Bitcoins without dealing with entities of unknown trust.
* Someone looking to borrow BTC but sell them for USD could hedge out the currency risk partially or fully through the use of options.  If nothing else buying way out of the money calls would be a method of capping currency risk.

Breaking news

Cameron and Tyler Winklevoss, the twins best known for their role in the history of Facebook, have had their fair share of headlines this week. The reason, of course, is their plan to come to market with an exchange-traded product giving  investors exposure to Bitcoin, a virtual currency that exists outside the realms of governments and central banks.

They filed with the U.S. Securities and Exchange Commission for a public listing of the Winklevoss Bitcoin Trust with a proposed valuation of $20m.

The value of the Bitcoin market has fluctuated in recent months but is currently valued at around $1bn. The Winklevoss twins say they own about 1% of the total Bitcoin stock.

There are risks, there is more than a little intrigue.

Tyler Winklevoss discussed the trust, its target market and potential future projects with sister title Financial News.

Financial News: Who is your target market? Who will buy this type of exchange-traded fund and why?

Tyler Winklevoss: Anyone who can’t get exposure to Bitcoin — such as pension funds —- or anyone who doesn’t want to go through the hassle of buying or physically storing it, such as mainstream retail investors. The best metaphor is to compare it to gold. How many people actually directly buy and hold gold bars? The gold ETCs [exchange-traded commodities] made it possible for investors to do that indirectly.

FN: Will the SEC approve this and when?

TW: It’s the first-ever digital math-based asset ETP [exchange-traded product], so it represents a whole new frontier. We haven’t talked with the SEC yet, but we think that, in this situation, they are likely to have more questions than they might for something that’s been done before.

FN: Who will be the lead market makers and authorized participants?

TW: It’s too early to say, but it is likely to be the usual suspects of banks, broker dealers and market makers.

FN: Who will trade the ETF?

TW: When the time comes, we will consider the benefits of the NYSE, Nasdaq and other exchanges.

FN: Who will prove there is liquidity and there is inventory backing the ETF?

TW: We think that there will be demand for frictionless exposure to Bitcoin and hopefully this demand will translate to authorized participants.

FN: How will you prove that the holdings are secure?

TW: We will provide more information regarding our security system and vaulting in an amendment to our registration statement. We have put substantial time into the issue and have developed new mechanisms for security and storage and have submitted a patent application for them. The onus will fall on us to explain eloquently why the Bitcoin in our trust is secure.

FN: You have 18 pages of risk factors associated with this offering. Are you already addressing investor concerns?

TW: We want to be incredibly transparent and allow people to know exactly what they’re getting into. That means putting the risks of both Bitcoin and the trust structure out there for people to read themselves.

FN: Are you planning to address that ‘lost key’ issue? [There is no password reset mechanism for the Bitcoin network. The risk factors warn that “the loss or destruction of a private key required to access a Bitcoin may be irreversible”.]

TW: The lost key mirrors the idea of losing your wallet in the middle of the night. The security system we’ve developed will address that issue and limit that risk.

FN: Are you worried that the US might legislate against Bitcoin? For example, by declaring that it is illegal for companies to process payments with a known Bitcoin agent?

TW: It doesn’t look like any regulator is trying to outlaw Bitcoin. They are looking to bring healthy and reasonable regulation, which I’m in favor of. Regulation can help bring Bitcoin into the mainstream without taking away the characteristics which attract people to it.

FN: How is Bitcoin Trust different from Exante? [a Bitcoin hedge fund run out of Malta]

TW: The trust is very different from Exante because Exante is a hedge fund and won’t be listed or regulated by the SEC. You can’t invest in Exante through an e-trade account. We want the trust to be the first Bitcoin exchange-traded product available to investors in the public market. Buying a share of the trust should be as easy as buying a share of common stock of any publicly listed company.”

FN: What’s the next project?

TW: We try to identify great entrepreneurs in young companies. Our focus has shifted to entrants in the Bitcoin space, but that doesn’t exclude other sectors. There is still a lot to come in the Bitcoin space, so I wouldn’t be surprised if our next investment or thing had a lot to do with it. Our best way of sourcing deals is through our real-life social network of friends, investors and entrepreneurs.

That's absolutely absurd. Why are bad laws and regs so hard to repeal??

Sadly failure to deliver is not illegal.  Reg SHO prohibits dealers from shorting unless they have borrowed the asset in question this ensures that it is impossible to fail to deliver (if you borrow the asset first and then short it, when settlement comes it is impossible to not deliver the asset).  However Reg SHO provides plenty of exemptions, if you meet one of the exemptions then Reg SHO doesn't apply and you can naked short sell. If you can't deliver that is a contractual dispute but assuming your failure to deliver arises from being exempt from Reg SHO then you haven't broken the regs.  Even if your failure to deliver is the result of breaking Reg SHO the failure to deliver is simply how you got caught the violation occurred when the short was made in violation of Reg SHO (you didn't have the asset in hand when shorting).  If you break Reg SHO and borrow after the fact and thus are able to deliver you are still in violation it just likely means you won't get caught.

Don't try to apply logic like I said it will just make your head hurt. The regs "could" simply require everyone at all times and for all reasons always have the asset in hand before selling.  Period.  The fact that the regs aren't written that way and the SEC sees a 50% reduction in failure to deliver as a "win" (which still means hundreds of billions in failures to deliver) just shows the law was written the way the powers that be wanted it written.

I think failure to deliver is illegal already covered under some business law, contract law I imagine

it may be illegal but it sure isn't enforced, sirixm has been dealing with this for years, and recently I learned that treasuries I think it was was getting fails to deliver as well.

Edit: yep, fails to deliver on treasuries...

http://www.zerohedge.com/news/2013-06-17/following-surge-fails-deliver-two-year-highs-treasury-market-finds-brief-respite

I think failure to deliver is illegal.

I don't think it's illegal.  A big stink was made in 2008 to try and make it illegal but it never happened.

On November 4, 2008, voters in South Dakota considered a ballot initiative, "The South Dakota Small Investor Protection Act", to end naked short selling in that state. The Securities Industry and Financial Markets Association of Washington and New York said they would take legal action if the measure passed.[45] The voters defeated the initiative.[46]

In July 2009, the SEC, under what the Wall Street Journal described as "intense political pressure," made permanent an interim rule that obliges brokerages to promptly buy or borrow securities when executing a short sale.[47] The SEC said that since the fall of 2008, abusive naked short selling had been reduced by 50%, and the number of threshold list securities (equity securities with too many "fails to deliver") declined from 582 in July 2008 to 63 in March 2009.[48][49]

In January 2010, Mary Schapiro, chairperson of the SEC, testified before the U.S. Financial Crisis Inquiry Commission, fails to deliver in equity securities has declined 63.4 percent, while persistent and large fails have declined 80.5 percent.

Just to clarify a little, this is incorrect. While the original ratio will be 0.2 BTC per share, that will decay over time, and the trust will spend a portion of those Bitcoins. There is nothing sinister or odd about this -- it is, on the contrary, common and entirely expected by investors.

their 'company' will then be able to pay them wages/dividends and generally bleed down the value of BTC whilst only they benefit from it. it's a clever piece of latteral thinking, but not a good thing for a technology whose best outcome would be it stabalised into a currency

it's illegal

Just to clarify a little, this is incorrect. While the original ratio will be 0.2 BTC per share, that will decay over time, and the trust will spend a portion of those Bitcoins. There is nothing sinister or odd about this -- it is, on the contrary, common and entirely expected by investors.

As I mentioned earlier in this thread, the relevant passage is on pp. 40-41 of the filing:

https://bitcointalksearch.org/topic/m.2636138

Specifically:

"The Trust will transfer Bitcoins to the Sponsor Custody Account in payment of the Sponsor’s Fee and transfer Bitcoins to the Trust Expense Account and sell Bitcoins to raise the funds needed for the payment of all Trust expenses not assumed by the Sponsor... As a result of the recurring transfers of Bitcoins to pay the Sponsor’s Fee and the Trust expenses not assumed by the Sponsor, the net asset value of the Trust (“NAV”) and, correspondingly, the fractional number of Bitcoins represented by each Share, will decrease over the life of the Trust."

Again, there is nothing in any way surprising about this.

I mean it is that hard to actually read the S-1 (publicly released).  It isn't a company it is an ETF and the Bitcoins are held by a trust.  0.2 BTC per share issued.  The trust can't spend any of those Bitcoins not a single Saotshi for anything... ever.   The trust simply keeps 0.2 BTC * the # of shares outstanding.  Nothing more, nothing less.

I think 1 year is definitely quite optimistic - I was thinking more like 18 months and then they say 'no'.

Will

If the ETF is approved, then the regulators are basically saying that Bitcoin is a commodity and the Trust does not have to register as a money transmitter.  Doesn't this basically open the pandora's box for every exchange out there?  This seems like an easy rejection but surely the Winklevii must think they have a fairly decent shot at getting approval.  Either they're getting poor legal counsel or they see something that I do not.  I simply do not see FinCEN rolling over on this one.

This may sound like I am pessimistic and perhaps I am but I would say I am cautiously optimistic.