this is about the most bullish Bitcoin sign we could have; David Birch bullish on Ethereum:
https://twitter.com/dgwbirch/status/516717611141574656
Topic: Gold collapsing. Bitcoin UP. - page 908. (Read 2032266 times)
Most contracts are closed out without delivery because both sides agree, unless the guy wants physical.. then the exchange has "extra" paper work to do to sort you out.
This is true and it is hard to imagine how any trading market could be different. Not allowed to close out a position?
The important point is though, if you feel physical is worth more than the offered price for whatever reason, you have the option to take it.
OK, I'll bite. I thought I remembered reading a long time ago that a good portion of GLD's holdings were paper products and not bars. But after a quick search it seems that is incorrect and most of GLD's holdings is allocated gold with HSBC.
Still "allocated gold at HSBC" isn't going to buy you the protection associated with physical gold in a crisis, which is the whole reason to hold some gold. For example, in the MF Global blowup customers with allocated gold with specific physical bars and serial numbers in their name, lost around 28%. The "allocated gold" distinction meant nothing in the end. I have less trust in HSBC than MF Global frankly. Also, MF Global was a small fish and they did this, what do you think is going to happen to "allocated gold" in a real crisis?
http://online.barrons.com/news/articles/SB50001424052748703856804577098740322633760?mod=googlenews_wsj?mod=googlenews_barrons
I'm now trying to remember why PHYS was differentiated, or was it just a open ended vs close ended difference?
Still "allocated gold at HSBC" isn't going to buy you the protection associated with physical gold in a crisis, which is the whole reason to hold some gold. For example, in the MF Global blowup customers with allocated gold with specific physical bars and serial numbers in their name, lost around 28%. The "allocated gold" distinction meant nothing in the end. I have less trust in HSBC than MF Global frankly. Also, MF Global was a small fish and they did this, what do you think is going to happen to "allocated gold" in a real crisis?
http://online.barrons.com/news/articles/SB50001424052748703856804577098740322633760?mod=googlenews_wsj?mod=googlenews_barrons
I'm now trying to remember why PHYS was differentiated, or was it just a open ended vs close ended difference?
Although they can be physically delivered most of the time they are not... infact I tried to deal with Soft Lumber before and even got on a call with a trader in CBE and he explained that if you want physical delivery you have to flag it as such prior taking the trade.. kinda stupid if you ask me.. that you have to explicitely tell the world hey this order is for physical delivery!.. shows how far we let ourselves get with bots/arbs and quant traders. Most contracts are closed out without delivery because both sides agree, unless the guy wants physical.. then the exchange has "extra" paper work to do to sort you out.
COMEX settles contracts in dollars (not real metal)
This part is incorrect. Gold futures settle in gold. You can click through here to find the actual settlement procedure and rules (types of bars, delivery location, etc.).
http://www.cmegroup.com/trading/metals/precious/gold_contract_specifications.html
"Things to know about the contracts:
Physically delivered"
GLD does hold physical metal, but it is not 100%, it is more like 10% (at least the last time I checked). GLD will add physical bars, but the vast majority of the daily tracking process is APs buying and selling COMEX futures into / out of GLD, which make up around 90% of GLD's assets (again I'm going off of memory here).
Regardless of the precise details, you've brought up a good point: with COIN, the trust and the custodian are the same entity. With GLD, this is not the case.
My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
What makes you think GLD doesn't hold gold bars (you mention COMEX futures)? I agree that there's a few sketchy details, but the GLD prospectus indicates that the custodian (HSBC) is responsible for safekeeping of physical bars of gold.
The biggest ETF (GLD) is physically backed: http://etfdb.com/etf/GLD/
Yes, that's what I'm saying.
Here's another excerpt from the GLD prospectus:
My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
What makes you think GLD doesn't hold gold bars (you mention COMEX futures)? I agree that there's a few sketchy details, but the GLD prospectus indicates that the custodian (HSBC) is responsible for safekeeping of physical bars of gold.
GLD does hold physical metal, but it is not 100%, it is more like 10% (at least the last time I checked). GLD will add physical bars, but the vast majority of the daily tracking process is APs buying and selling COMEX futures into / out of GLD, which make up around 90% of GLD's assets (again I'm going off of memory here).
This is why Sprott Physical Gold Trust PHYS is differentiated. PHYS holds 100% (OK something like 99%) of assets as physical bars held in the name of the trust.
My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
What makes you think GLD doesn't hold gold bars (you mention COMEX futures)? I agree that there's a few sketchy details, but the GLD prospectus indicates that the custodian (HSBC) is responsible for safekeeping of physical bars of gold.
The biggest ETF (GLD) is physically backed: http://etfdb.com/etf/GLD/
My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
What makes you think GLD doesn't hold gold bars (you mention COMEX futures)? I agree that there's a few sketchy details, but the GLD prospectus indicates that the custodian (HSBC) is responsible for safekeeping of physical bars of gold.
I see thanks, so you can buy shares with bitcoins then. When you sell do you get bitcoins back or fiat? Is there an official statement about this?
Only the "authorized participants" (APs) can. But as long as there's a few competing APs, that's all that's actually required to ensure that NAV tracks the underlying (because they're all competing for a small guaranteed arbitrage profit).
Is there an official statement about this?
Yes, it's all written up in the SEC documents the Winklevoss's filed (or just google how ETFs work in general).
ok cool so these APs are acting as market peg bots essentially guiding the price.. wonder if it holds long term... I guess GLD / SLV are examples of something that has been working. So we can then draw some correlation to the actual bitcoin price once massive volume steps in thru COIN, however we all know the kind of manipulation that will ensue once we are up there in the clouds!
My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
If settlement is done via BTC this is bullish and best case scenario IMO because any volume input will count as aggregate volume towards the buy side. The initial volume will be all bullish.
Thanks for the explanation. Seems like a definite positive if it gets off the ground.
I see thanks, so you can buy shares with bitcoins then. When you sell do you get bitcoins back or fiat? Is there an official statement about this?
Only the "authorized participants" (APs) can. But as long as there's a few competing APs, that's all that's actually required to ensure that NAV tracks the underlying (because they're all competing for a small guaranteed arbitrage profit).
Is there an official statement about this?
Yes, it's all written up in the SEC documents the Winklevoss's filed (or just google how ETFs work in general).
ok cool so these APs are acting as market peg bots essentially guiding the price.. wonder if it holds long term... I guess GLD / SLV are examples of something that has been working. So we can then draw some correlation to the actual bitcoin price once massive volume steps in thru COIN, however we all know the kind of manipulation that will ensue once we are up there in the clouds!
My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
If settlement is done via BTC this is bullish and best case scenario IMO because any volume input will count as aggregate volume towards the buy side. The initial volume will be all bullish.
I see thanks, so you can buy shares with bitcoins then. When you sell do you get bitcoins back or fiat? Is there an official statement about this?
Only the "authorized participants" (APs) can. But as long as there's a few competing APs, that's all that's actually required to ensure that NAV tracks the underlying (because they're all competing for a small guaranteed arbitrage profit).
Is there an official statement about this?
Yes, it's all written up in the SEC documents the Winklevoss's filed (or just google how ETFs work in general).
ok cool so these APs are acting as market peg bots essentially guiding the price.. wonder if it holds long term... I guess GLD / SLV are examples of something that has been working. So we can then draw some correlation to the actual bitcoin price once massive volume steps in thru COIN, however we all know the kind of manipulation that will ensue once we are up there in the clouds!
My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.
With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)
With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...
do you know the types who will be acting as AP's for COIN? GS, JPM?
I just skimmed the two filings here and here and all I found was this (it says a list of the APs can be obtained from the trustee or sponsor):
However, I thought I remembered reading names of some of the possible APs many moons ago but I could be mistaken (and no I don't recall GS or JPM). Perhaps someone else will know.
COIN will work just like GLD but using bitcoins as the underlying. If you own COIN shares all it means is that the Winklevoss ETF is holding your BTC for you in trust. If it's cheaper to purchase bitcoins from Bitstamp than the equivalent amount of shares from COIN, then one of the "authorized participants" will simultaneously purchase a "basket" of bitcoins from Bitstamp and short a "basket" of COIN shares on the NASDAQ (giving them a positive cash balance). They will then deliver those bitcoins to the trust (COIN) in exchange for a basket's worth of newly created shares. They will then use these shares to close their short position with a guaranteed profit.
This is the arbitrage mechanism that ensures the NAV of the ETF tracks the underlying.
This is the arbitrage mechanism that ensures the NAV of the ETF tracks the underlying.
Peter, is this similar to the way SecondMarket will handle things?
Sorry, but I don't know how SecondMarket handles things.
SecondMarket buys BTC OTC heavily discounted. They trade on their reputation to get better rates than most exchanges, only in worst case to they buy through exchanges.
I suspect secondMarket will work to be an AP as well.
COIN will work just like GLD but using bitcoins as the underlying. If you own COIN shares all it means is that the Winklevoss ETF is holding your BTC for you in trust. If it's cheaper to purchase bitcoins from Bitstamp than the equivalent amount of shares from COIN, then one of the "authorized participants" will simultaneously purchase a "basket" of bitcoins from Bitstamp and short a "basket" of COIN shares on the NASDAQ (giving them a positive cash balance). They will then deliver those bitcoins to the trust (COIN) in exchange for a basket's worth of newly created shares. They will then use these shares to close their short position with a guaranteed profit.
This is the arbitrage mechanism that ensures the NAV of the ETF tracks the underlying.
This is the arbitrage mechanism that ensures the NAV of the ETF tracks the underlying.
Peter, is this similar to the way SecondMarket will handle things?
Sorry, but I don't know how SecondMarket handles things.
do you know the types who will be acting as AP's for COIN? GS, JPM?
COIN will work just like GLD but using bitcoins as the underlying. If you own COIN shares all it means is that the Winklevoss ETF is holding your BTC for you in trust. If it's cheaper to purchase bitcoins from Bitstamp than the equivalent amount of shares from COIN, then one of the "authorized participants" will simultaneously purchase a "basket" of bitcoins from Bitstamp and short a "basket" of COIN shares on the NASDAQ (giving them a positive cash balance). They will then deliver those bitcoins to the trust (COIN) in exchange for a basket's worth of newly created shares. They will then use these shares to close their short position with a guaranteed profit.
This is the arbitrage mechanism that ensures the NAV of the ETF tracks the underlying.
This is the arbitrage mechanism that ensures the NAV of the ETF tracks the underlying.
Peter, is this similar to the way SecondMarket will handle things?
Sorry, but I don't know how SecondMarket handles things.
Circle may be a game changer. You can sign-up on your phone from anywhere and purchase your first bitcoins with your credit card within minutes. The fact that they use mandatory 2FA (via SMS by default) also makes me feel better about recommending this service to acquaintances. Should COIN launch this winter, then the fiat <---> bitcoin gateway infrastructure will be ripe to support another wave of adoption.
I still maintain the impact of COIN is being grossly underestimated. The vast majority of "investment dollars" do not sit on bank accounts linked to coinbase or credit card limits linked to circle.
Instead most funds sit in brokerage accounts. During the run where I made most of my purchases, my biggest obstacle was wiring funds from my Brokerage account to my Bank account, so then I could issue a coinbase purchase. Since I see bitcoin as a core asset to hold, this was completely backwards.
COIN will link brokerage accounts to bitcoin, there is a huge amount of funds there....
there is also a huge difference in that you do not actually own bitcoins but COIN shares.
sure some institutional investors might not care. but you are then only "invested" in the Bitcoin economy and not necessarily own an actual share it in. which is perfectly fine, but still....
(I have to say I might be wrong. Could you claim your share in COIN for its equivalent in BTC? I do not think so but maybe someone can confirm.)
I think the shares will be used to purchase BTC so it will roughly track the price of bitcoin. This is at the owners descretion.... so you may see cases where it does not track it. Simply put if its not making money people will not buy shares... but dividends should be offered to entice people to buy shares rather than bitcoin... thats how I kind of guess it works anyway on top of my head knowing how equities work. Because its backed by a regulated exchange, many people will simply hold the shares collecting dividends rather than bitcoin because you would get value on the way up (roughly) and collect interest. For me, personally I prefer to hold bitAssets once the pegs are known to work in bitshares as this will collect me more interest and I own it in a decentralized system rather than depend on a stock exchange susceptible to the pitfals of our modern economy... can happen overnight... its a tradeoff either way.
COIN will work just like GLD but using bitcoins as the underlying. If you own COIN shares all it means is that the Winklevoss ETF is holding your BTC for you in trust. If it's cheaper to purchase bitcoins from Bitstamp than the equivalent amount of shares from COIN, then one of the "authorized participants" will simultaneously purchase a "basket" of bitcoins from Bitstamp and short a "basket" of COIN shares on the NASDAQ (giving them a positive cash balance). They will then deliver those bitcoins to the trust (COIN) in exchange for a basket's worth of newly created shares. They will then use these shares to close their short position with a guaranteed profit.
This is the arbitrage mechanism that ensures the NAV of the ETF tracks the underlying.
Peter, is this similar to the way SecondMarket will handle things?
How the hell would you arb COIN with bitcoin? Does it accept bitcoin for shares? If it doesn't then it cant be a leading indicator unless bitcoins are directly convertible to COINS. If COIN shares are used to buy bitcoins then it may be leading indicator as far as seeing volume come into the market, but getting back out would mean selling shares thru COINS and nothing to do with bitcoin, COIN back to fiat... and winklesvoss have to sell the bitcoins they bought at a loss or a premium depending price at the end of the trading day.
Unless you are buying a "basket" of COIN for BTC as an AP you buy through your brokerage, so whether you can buy with BTC for us mere mortals will depend on whether your broker accepts them. I'm not aware of any that do today.
I suspect that the CFTC will treat bitcoin purchases like they treat gold purchases wrt ETF.
So selling COIN for USD and buying bitcoin for USD may be subject to wash sale rules.
CFTC hasn't made any official statement, but one of the anticipated regulatory effects of COIN is that large BTC purchases may become reportable to the CFTC for compliance.
As to whether GLD/SLV are working, there are differences of opinion on that as well.
I see thanks, so you can buy shares with bitcoins then. When you sell do you get bitcoins back or fiat? Is there an official statement about this?
Only the "authorized participants" (APs) can. But as long as there's a few competing APs, that's all that's actually required to ensure that NAV tracks the underlying (because they're all competing for a small guaranteed arbitrage profit).
Is there an official statement about this?
Yes, it's all written up in the SEC documents the Winklevoss's filed (or just google how ETFs work in general).
ok cool so these APs are acting as market peg bots essentially guiding the price.. wonder if it holds long term... I guess GLD / SLV are examples of something that has been working. So we can then draw some correlation to the actual bitcoin price once massive volume steps in thru COIN, however we all know the kind of manipulation that will ensue once we are up there in the clouds!
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