Topic: Winkelvoss ETP could become THE pricing mechanism for BTC - page 2. (Read 15362 times)

Totally different use cases.  The ETF is good for institutions with rules which prevent them from holding BTC (which covers most institutional funds), and custodial accounts generally.  It's also a way to leverage high-quality financial infrastructure for derivatives. It allows one to short at low cost, to lever at low cost, and to synthetically gain exposure (in either direction) with positive carry.
90% of the people do not care about these things, but 90% of the money does.

it may, in the short term, but I think the EFT trust risks becoming a sort of myspace (kinda ironic) because as apps get better for handeling BTC until the killer app come thought, why would you use and EFT?

Further the BTC in the EFT are always less secure as they are amenable to court orders.

I was thinking the same thing.

When is this fund going to happen?

Bring it on!

Anyone (with a brokerage account)? Are you sure about that?

I would bet the farm on exactly this! CBOE wants to make money.  If a member wants the options, if there is demand, options will be created.  And like another posted said, there will be demand for this.  From this, all sorts of mechanisms are available for larger institutions to "hedge" their bets, in either direction.

On a total side note, interesting company, background, and product on the market Greg.  Montana to England, probably don't see many of those.  

Should the ETF go ahead, then IMHO, it's very likely that standardized options will appear -- and that, finally and at long last, will provide a credible mechanism for large Bitcoin handlers to hedge positions effectively. (No, the existing quasi options offered on "THE" exchange don't come close to offering such a credible mechanism. And the futures available on ICBIT become less and less appealing with every new change to the exchange's "rules".) Making more effective hedging possible would arguably remove one of the major roadblocks currently standing in the way of larger scale adoption of Bitcoin for real commerce.

If a CBOE member wants to make a market, then there will be options.  It's pretty well guaranteed if there is significant traffic.  And there will be traffic.  Oh yes, there will be traffic.

Is it easy?  Yes.  Will it happen?  Most likely, eventually.  CBOE (Chicago Board Options Exchange) lists options for a huge amount of ETF's.  GLD ETF is a fairly active one.

http://www.cboe.com/Products/optionsOnETFs.aspx

So once this starts trading hopefully later this year, at some point down the road (3+ months), it'll probably be listed on the CBOE depending on the interest in creating options on it.

So will it be easily possible to build derivatives on this ETF (options, futures,...)?

How likely is that to happen?

Definitely.  Try to short both TAZ and TAS.  If you could do it with low carry, you'd be guaranteed an amazing return with essentially no volatility, but borrowing them both is ... beyond me, anyhow.

HOWEVER you could short them both synthetically with postive carry by making diagonal put spreads.  Vol goes up but the outcome is no less guaranteed in aggregate over time.  Similarly with BTC and Winklefloii puts.

Can't see this ever being profitable.  Buy bitcoin, lets assume no fees (yes, might be some very low fees).  Shorting the ETF will incur interest.  How much price difference can the ETF really have over, say 3-6 months, over the actually price of Bitcoin assuming the ETF has an expense ratio of 1%?  With the interest for shorting, minor trading costs, I think it'll be a really tough arb play.

Right.
By this metric you can expect the fund to create many cheap coins.
The fund is expected to be a net-buyer for a long time even though it will be selling some continuously for fees.


Yes, though with the current activity in the gold ETFs, you are likely to get a better/swifter payout there.  Those are being bled out even now by redemption.

Cheap when I can buy them, relative to when I can use them is the issue.

The arb is to buy bitcoin and short the ETF.  Poor carry unless it's levered super cheaply.

There really isn't such a thing as cheap coins. 
They are worth whatever they are worth when you use them.  If you never use them it never matters what they are worth.  So from your perspective, if they are worth more when you use then than when you acquired them, you got them cheap.


The ETF slowly bleeds out coins in the form of fees and costs (most of which go to other Winklevoss family companies), so it is not entirely a bitcoin black hole investment vehicle.  There is continuous residual dilution of coins in the EFT and as new purchases are apportioned by the assets held in the fund, this dilution never reverses and forms a type of constant debasement of the per share value over time.
That this small continuous dilution is expected to be more than offset by the improvement in value of the bitcoin held is assumed by most anyone and certainly by all who would invest in it.

I can't get them cheap.  Is bad, very very bad.

Exactly this.  I mean, what are they going to do, hoard BTC?  Buy up all the "inventory"?  A physical asset is much different.  Aluminum is needed by companies to make things.  Gold and Bitcoin are not.  If a company hoards, they will drive up the price.  Ok, so how is that bad?

Manipulation of physical inventory is differentiated by the fact that bitcoin is not physical and can be divided to 8 decimals. Ie if you drive up the price of btcs, you do not create scarcity. You increase the purchasing power of existing holders of Btc, thus they go on a spending spree if they were so inclined.

So I say to Goldman - please manipulate Btcs. This would do everyone a big favour.

Manipulating storage is big business and we can see it from Goldman

http://www.nakedcapitalism.com/2013/07/how-goldman-made-5-billion-by-manipulating-aluminum-inventories-and-copper-is-up-next.html

I agree with general view that BitCoin ETF must trade at premium, I don't see how it would trade at discount unless there is fear of what is actually in inventory?

That would be interesting if the price on the ETF is overpriced! Gold in an ETF runs below the price of cash gold. It seems to me that a managed account would be more expensive. There's been many challenges about there really being gold in the gold ETF though. Is inventory really just swaps and leases instead? I guess the same will be done with Bitcoin through derivatives and I'm sure with obfuscation techniques we'll never really be able to tell all the leverage associated with the Bitcoin... make me wonder. Could a leverage protocol be designed?

True, but which does not exist anywhere as of now and does not exist as legal structure and asset class in many of developing countries While stocks and bonds remain primary financial assets, at least where I live. And I don't intend on changing that due to fancy asset class.

But thank You for pointing that out.

Further, US ETFs are not accessible world wide, while they may be an ideal way of trading and I don't see how (except from regulation which is country-specific) changes the fact if share You trade is stock of a company or ETF, if underlying is the same, and other terms are similar.

This gets mentioned often, but I think it misses the point.

How is this different for general public and status quo than holding anything other than keys of Your real estate? Its always a claim, while key is held by Your broker/banker/etc.

Technically, if bank would say I dunno You, You wouldnt have access to anything. And I understand that is whole point of BitCoin but this ETF is trying to do exactly opposite, get people to invest in new asset class, just because it provides returns. Rather than because it provides You with decentralised, crypto, pseudo-privacy protocol.

These people do not intend to buy something with a share of ETF, and if and when they sell it, it will be for dollars. So they never touch BitCoins anyways.

if I am getting it right?