Topic: Winklevoss ETF... What are the likely scenarios. (Read 2145 times)

I'm not sure what to think, yes it may bring about more investment and stability however will the price of BTC end up being determined by the ETF as with gold and silver?

We know the price of gold and silver have been manipulated by the ETF for a long time, supply and demand doesn't play a part.. even the most recent drop in gold price coincided with a big increase in demand for physical gold and even most of those selling their ETF's did so in order to buy physical which in turn caused the price to drop below the cost to mine.   Seems a great time to buy but what has to happen before we see the real price based on supply and demand?  I dunno, it's messed up and I can't imagine how a BTC ETF will work out.

I feel as if this is just going to attract more speculative volume, therefore demand, therefore heightened price. Sure, that's great. But aren't we all after a society that uses a decentralized currency to conduct payments etc.?

It's not exactly great for Bitcoin.. But for the price, I don't see how it can be anything but a positive, I guess.

I'm not too concerned about the prop, due to limited supply of coins

In a normal bubble, the asset's supply will increase following the price increase, so when price finally reached a turning point that the amount of fiat money supply is not enough to support the price, the added asset supply enter the market at the same time at its biggest scale, so the price will crash hard and long

But for bitcoin, supply is always the same, when the price rised, the liquidity will immediately become a problem, so price rise quickly and crash quickly, like a storm in summer, shake out speculators, but does not really have big negative effect for long term investors(The rise and crash is so quick that most of the investors just do not feel it   )

And a fast rise in price and crash will attract a whole new group of investors who were watching on the side line. Previous owners might have incentive to sell the coin when they had great profit, but why cash out to USD if bitcoin itself is even better in holding values? So most of their sales will be small scale, or not at all if they could spend coins to buy other things

the market will decide it. some people want to buy bitcoins but don't want to spend the time to figure out how to buy them and then secure them (no matter how easy). Instead, they will either pay a broker to buy the ETF, with the added flexibility of using their retirement funds to purchase.

I see 2 possible scenario's

1. The ETF is a success, it is launched within months, it attracts loads of money, helps pushing btc price up, creating new mania, attracting more people to bitcoin that build the bitcoin economy.

2. The ETF is a failure, it does not get approved by authorities or attracts some money but not enough to make a difference to the exchange rate. This is also possible as indeed the future of bitcoin in my opinion is not ETF's or bitcoin banks, but people owning the bitcoins themselves in a safe & user friendly manner.

It should fail at whatever their intitial offer price is, because any potential buyer knows (one of the biggest) bitcoin holders is selling-out at X price. It makes no sense to buy the product until a clear post offer position, including that of tax liabilties and any knock on costs and effect from that is known.

Do you realize the runaway effect that happens when the money received is used to buy additional assets (Bitcoins), the amount available on the market, the increased proportion of the asset a share might represents vs the value of all shares? I know it's complicated and the use of technical terms hinders understanding, sorry.
I wish I did fully understand it myself.

That was just plain unhelpful. I'll look up how derivatives work later as they appear to be a fancy financial instrument right now.

What is there to explain about it? This is how financial derivatives work.

Then what could happen is that either:
-A share represents more than 1/5 Bitcoin
-The share represents still 1/5 BTC for which they might issue additional shares
-something in-between
-This is all Bullshit and they are just leave it at the 200.000 Bitcoins
* It's all in above link albeit it's very technical and I don't quite understand it myself but I do notice the potential similarity*

No sarcasm but I'm obviously confused. So Winklevi will sell the stocks for their BTC (not actual BTC transferred) and the proceeds from which they may invest in real BTC? I don't get it...

Seriously, if you would like to explain your theory, I'm all ears.

Either I don't get your sarcasm or you don't get that this is entirety ethical and rational, just dangerous.

What? They would sell their ETF BTC to buy real BTC? Something something ponzi.

They aren't, right now. And they haven't said they will.
This is strictly theoretical.

They own 200K BTC for which they sell 1M shares, all right so good. However since they are paid in Dollars they could use these Dollars to re-invest them in BTC.
Get it? And depending on how the value of the ETF is derived this can result in a liquidity crisis as explained above.

How are the winklevoss propping it up? they are just allowing a larger market to express their demand. Not propping anything up.

What I like to mention here, like I already described before is the dangerous game the Vinklevoss are playing if they decide to "prop up".

If they leave it at the 200K and be done with it it wouldn't have any dire consequences, maybe siphon a few buyers off mtgox but overall stabilize the price.
However if they do prop up it will lead to a very chaotic market where due to insufficient liquidity prices rally up crazy and crash instantly after the liquidity returns.
There is an interesting academic work on the subject which you can observe here:
http://demonstrations.wolfram.com/TheHazardsOfProppingUpBubblesAndChaos/

Where did you get that info ?

They plan to sell about $20m in shares ... that's 200,000 BTC ... they don't have 1,000,000 BTC

Um aren't they keeping 80% of the etf for themselves?

I am interested in your theory that one day we will 'find a way to make gold more cheaply'
There are approx 6 grams of gold in a TONNES of ore and many more tonnes of earth and rock need to be moved to get that tonne of ore. It's a lot of work hence some operations are now uprofitable at the current gold price. Hard to make this cheaper. And that's before extraction costs.

As for the ETF, I think the exposure is good so long as it succeeds and there is no 'funny business' with the market price in the run up to the IPO ... it will be clear for all to see if this happens - could backfire badly.

As for an ETF tracking BTC and backed by BTC, ultimately it's just another speculative vehicle at a time when what we really need is people using BTC ... a Bitcoin economy. I don't think we can bypass that stage and move straight to BTC as a store of value - could be wrong, but this is my opinion. This does nothing to address that. If anything it makes the situation worse if the trust ends up buying more BTC and putting them into speculators hands.
Granted, it will provide easier access for some people to 'invest', but IMO without a credible BTC economy, it will not succeed.

The impact on price - given that they appear to be putting their own BTC into the trust, if there is no manipulation, it is price neutral. Its basically an OTC offering of their own stash. If the fund is successful, in the long run it will be expanded and more BTC bought to back it. So it has bullish potential for price.

Personally I find the fact that they are willing to sell their stash slightly worrying. Why would you sell $20m of something you thought was going to explode in price, just to earn some fees on managing it ?

EDIT : Just read the answer ... they avoid tax paying tax on their profits this way  

Yes they big failure

they are broke up and they will fail