Topic: GBTC Bitcoin Investment Trust Observer - page 79. (Read 262357 times)

Well, SMBIT should buy BTC only when someone buys fund shares from them.  And they should sell BTC when, and only when, some client liquidates his shares (sells them back to SecondMarket).  -- 10 shares = 1 BTC. 

So the question is, why aren't people buying more SMBIT shares?  Well, the value of 1 share (which is 1/10 of btcoin's market price, by definition) fell ~25% over the past month, and is again near the lowest it has been since November.  Clients who buy fund shares now will be chained to them for six months.   What will happen to the BTC price (and hence to the value of their investment) in those six months?

Add to that the FINCEN advisory ...

And then there is the matter that the BTC price is being determined by thousands of amateur day-traders in China.  Would you trust your savings to them?  I wonder if prospective clients are aware of this .

update

The price is still falling, they will buy at a better situation.

Isn't this a good time for a massive buy from SecondMarket?

It is best if the coins are bought in some kind of central marketplace. When this happens the marketplace can report an increased level of volume, creating more attention to be pointed at the BTC/USD market.

Did I say it would not?  I wrote

... and surely there is a good supply of those.  How many of them will buy bitcoin funds, I cannot guess.

As for the bet, I said many times that I do not bet unless I am fairly certain that I am right, and I believe I know why the other guy is wrong.  Which is not the case here.  

In order to bet one must assign numeric probabilities to future events, and have confidence in those numbers. (This gets dangerously close to assigning probabilities to probabilities, which would get one immediately excommunicated from the Statistical Church; but maybe you see what I mean.)  Sometimes, a future experiment (like tomorrow's raining or not raining) can be viewed as "equivalent" to a series of past experiments, and then one can use their observed outcome frequencies as probabilities for that future experiment.  Sometimes the possible outcomes of the experiment (like, a throw of a die) are physically equivalent, so it is reasonable to assume that they have equal probabilities.  But how could I rationally assign probabilities to future events like "the SEC will approve COIN trading on NASDAQ", or "investors will not notice that the fund's value is defined in the Chinese exchanges"?  

Moreover, I am not  convinced that the opening of a fund will increase the demand for bitcoins on the market.  The COIN fund, for example, will probably buy bitcoins from the Winklevoss twins at first. (That, I presume, is the reason why they want to create the fund.)  If that is their plan, then, while their BTC reserves last, the fund will not generate any new demand for BTC in the exchanges, but on the other hand will swallow some of the money that could have gone into buying BTC there.  In that case, the opening of the fund may depress the price at first. (SMBIT opened in September 2013, was there a price jump because of that?  What about PBP?)

And, if that is their plan, why do the Winklevosses want to sell their coins to the fund, instead of holding them?  Have they lost faith on the moon?  

EDIT: typo "die"

Bitcoin does not seem to be a stellar investment right now.  I would think that any competent investor (or investment advisor) would stop reading when he finds out that the 590$ price is not tied to its predicted utility in e-commerce, but is largely determined by the Chinese day traders, and has already dropped to 350$ on mere rumors that the Chinese government would impose harsher restrictions. Who would want to put their savings into something like that?

A bitcoin-based fund, ET or not, has all the financial risk as bitcoin itself.  Even if it is registered in New York, its price will still be a function of the mood of the Chinese day-traders.  The probability that it will collapse to zero is indeterminate, but certainly higher than that of APPL going to zero.

On the other hand, the probability that it will "go to the moon" is indeterminate too, and now depends on the demand for the ETF fund generating demand for bitcoin, thus driving up the price, thus justifying demand for the fund -- in other words, depends on the fund pulling itself up by its bootstraps.  It is not at all like gold, not even overpumped gold.

And I still wondering how much the insurance companies will charge to insure a bitcoin fund against theft/embezzlement of its bitcoins.

Bitcoin-based funds offer some convenience and security over raw bitcoin, especially for the investor who is not tech-savy.  (But note that a long-term investor could also buy raw bitcoins with similar security over-the-counter, e.g. through a broker.  Exchanges should be used only by experienced speculators and brokers.)  On the other hand, bitcoin fund shares may have more limited liquidity, and the fund will charge non-negligible fees.  And there is the added risk that the fund will crash (by hacker attack, embezzlement, or loss of confidence in management), even if bitcoin itself doesn't.

So, I suspect that bitcoin funds attract (and will continue to attract) only investors who are naive both technically and financially.

If you recall, Fortress (a huge investment group) had invested in raw bitcoins las year; but after BTC gave them the only red line on their quarterly report, they traded their BTC with Pantera for shares of the PBP fund management company.  Note, those were NOT shares of PBP itself, whose value depends on bitcoin price, but shares of the company that manages the fund, and will make money from fees whatever happens to the price.

I have it on pretty decent sources that miners have been getting many offers from institutional buyers wanting every available btc off exchange. I think this is why we see very low on exchange volume. Miners arent selling on exchanges anymore and large money is trying all it can not to run up the price.

This cannot go on forever. At some point the dam has to break.

I believe if/when the ETF gets confirmed, there is going to be a major rush by institutions to buy off exchange to front run the exchange. I think there is STILL A LOT of skepticism and denial on wallstreet about whether the SEC will approve the ETF.

I think if it gets approved (and the information sources I have gotten about miners are true) that a bitcoin run (on the bitcoin bank) is all but guaranteed.

Yes, we can say that the ETF is somewhat priced in the current day trading community. But that community represents such a tiny tiny sum of money, they almost dont matter. And more so and more so as the volume has dropped.

I think the ETF is going to cause a front running tidal wave, whether the ETF itself actually effects the price anytime soon - doesnt really matter.

Fair enough. But with price/market cap being what it is, it seems the majority (of capital) does consider the news "digested".

Doesn't mean that, the moment an ETF actually starts buying beyond the markets expectations, that prospect won't be revised upwards.

But why does it matter who they're buying the coins from? Buying a coin directly from early adopters or buying them on an exchange don't matter, do they? The result is the same whether early adopters decide to sell some of their coins to them directly or on an exchange...

And the question remains, when the ETF's going to open?

i honestly wonder if second market will actually work. They purchase coins from early adopters (according to them) but if they purchased from the exchanges it would help bitcoin. I think the twins have a better chance. but I honestly hope that second market does work.

With the current market cap...I have to disagree strongly

The question isn't why the fund stopped buying.  The fund buys and sells bitcoins in direct response to people buying and selling shares of the fund.

The relevant question, which Silbert probably has insight into, is is why people aren't buying into the fund as vigorously these days.  Perhaps they have exhausted their list of people likely to buy, and they have scaled back their cold call operation.  Perhaps the months of price stability has made it a hard sell.  I'm guessing that once we get back over $1000, fund sales will pick up again.

Because someone sold 1.800 BTC you are worried? On the other hand, someone bought these same 1.800 BTC. BIT trust ATM is one of the biggest bagholders and it is possible that someone just gave up, so who cares.

But it is suspicious why that fund stopped buying, this should be the question for Silbert next time. Although he is now full times BTC, planning exchange so he is cooking smth. There are and will be still other funds and BIT will not play so important role. Draper on his own has 30% coins of that fund. Don't worry.

Really? That's a pretty bold statement! I hope you're right, of course, but what if nothing happens then? But I guess it's too early to speculate before the ETF even started. You also still think it will have a big influence, even if people just sold their SecondMarket BTCs?

Nope, an ETF will change EVERYTHING. Before ETF, gold was $250 an ounce for a long time. After various gold ETF were created, it went to $1600 an ounce and is currently $1300. ETF will only have a BIGGER effect on Bitcoin, because gold already had a mature investment/trading community before ETF were created for it, yet it still had a huge effect on gold price.

WOW!!! How on earth did that happen? And why? Did they already sell those BTC on the market? Are they still going to be dumped? Could that explain all the dumps over the past weeks, because they were trying to get rid of those BTC?
I'm alarmed!

It may not be fair to extrapolate the impact of the Second Market BIT to predict the impact of a real ETF, which would make Bitcoin easily available to the average person.  We're talking about a completely different, and orders of magnitude larger, audience.

I think the Winklevoss ETF will take us to around $10,000, followed of course by the inevitable crash to around $5,000.