People could just buy up the shorted "undervalued" paper and redeem it for real bitcoins until the ETPs stash is exhausted, no?
Indeed - if they did this it wouldn't last very long at all (so I very much doubt they would put in the time, money and effort to do this).
If they get it right then I don't think it would be anything other than good for Bitcoin so I think the potential upside outweighs the risk that it is somehow going to be a scam (especially as their reputations would be in tatters if that is what it turned out to be).
It doesn't take a scam, just some lawyers and bankers and the rule of law.
Some facts and history, and if you will permit it, a modicum of forward looking:
Do not forget that ETF can also be required to be redeemed in cash rather than Bitcoin (as was done with gold). Read the fine print. ETFs, if they become the authoritative pricing mechanism, are the most efficient method for a central bank to fix the price of opposing currencies. It only took a US$28 billion block sale to drop the gold/dollar price one fine morning in April. I'm guessing that wasn't from the pocket of an individual investor.
The central bank have in its charter the manipulation of opposing currency. The Fed, as an agent of the US Government, will rig any market that poses a threat (or “disorderly condition”) to the value of the dollar.
http://www.federalreserve.gov/pf/pdf/pf_4.pdfCheck the bottom of page 53-54.
Then contemplate this in conjunction with FinCEN deeming Bitcoin a currency, and it being traded on the NY exchange markets... you can see where this may go, yes?
This combination provides a recipe for direct manipulation of Bitcoin/dollar pricing through a non-redeemable bitcoin marketplace in which only quantitatively eased dollars are traded. It is all perfectly legal, and has been practiced and previously executed right out in the open. (Do you think there is any federal investigation by the SEC or CFTC over the gold price manipulation?)
Or is your ultimate contention is that the Winklevoss bros are not going to allow this because it would tarnish their reputation among the Bitcoin populace?
I certainly do not know their mind or intentions. They may be full of grace and truth deep in their hearts, but if you were they, and the time came down the road where you had to choose sides between the most powerful central bank on the planet, and us Bitcoin geeks that remind them of Zuckerberg, which side would you choose?
Again, I hope they make a bunch of money, I wish them every success and appreciate their interest. If they are interested I could probably help them to make a lot more money still. BUT, I am not counting on this new ETF to be any kind of savior of Bitcoin, or even to be particularly helpful to Bitcoin. It flows the very much in the other way...Bitcoiners are helping them. If you are relying on it for anything, consider why you do that.