Topic: Winklevoss ETF will list on NASDAQ as &quot;COIN&quot; (Read 5955 times)

Quote from: wachtwoord on July 11, 2014, 08:08:47 PM

If more btc has to be bought or sold to balance out when does it happen? In real time during the trading day? End of trading day? Or just when the winks feel they need to buy or sell a bunch?

The fund does nothing. Certain big players are allowed to either add buckets of Bitcoin to the fund in exchange for shares or redeem shares in exchange for Bitcoins. Whenever the price of the fund doesn't match the price of Bitcoin in the overall market this will be an opportunity for arbitrage for these players. We let the free market do the rest and presto, the price will follow the market price with a very narrow error margin.

Ok, thats basically like another exchange and every buy in the ETF equals a buy on a regular exchange.

No it doesn't. The shares are traded and can go up in value. If the value of a share is larger than the value of 0.2 BTC and there is sufficient liquidity a market maker will arbitrage, buy a number of Bitcoins (with the number as defined basket size in the filing) send these to the fund and will in exchange get new shares. Subsequently it can sell these shares on the open market making money (remember the shares were trading above the value for Bitcoin on the open market).

1 share in the fund will always represent 0.2 BTC (unless they do a share split) and if more Bitcoin are deposited into the fund more shares will be given out (without diluting shareholders!). Reversely, a market maker can also buy shares in COIN and subsequently redeem these in exchange for the underlying Bitcoins (also per basket). It will do so when the market price of COIN is below that of Bitcoin (and subsequently they can sell the received Bitcoins on the open market to complete the arbitrage cycle).

It would be more accurate to say that every time someone buys 5 shares of COIN then it would be the same as someone buying one BTC on an exchange.

If the price of COIN was above 1/5 the price of BTC then people would buy BTC on the exchanges in anticipation of APs buying bitcoin with the intention of redeeming it for COIN and selling the COIN on the market.

BitchicksHusband

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Quote from: ImI on July 11, 2014, 07:53:10 PM

Quote from: wachtwoord on July 11, 2014, 06:17:04 PM

Quote from: vuduchyld on July 11, 2014, 02:40:08 PM

If more btc has to be bought or sold to balance out when does it happen? In real time during the trading day? End of trading day? Or just when the winks feel they need to buy or sell a bunch?

The fund does nothing. Certain big players are allowed to either add buckets of Bitcoin to the fund in exchange for shares or redeem shares in exchange for Bitcoins. Whenever the price of the fund doesn't match the price of Bitcoin in the overall market this will be an opportunity for arbitrage for these players. We let the free market do the rest and presto, the price will follow the market price with a very narrow error margin.

Ok, thats basically like another exchange and every buy in the ETF equals a buy on a regular exchange.

No it doesn't. The shares are traded and can go up in value. If the value of a share is larger than the value of 0.2 BTC and there is sufficient liquidity a market maker will arbitrage, buy a number of Bitcoins (with the number as defined basket size in the filing) send these to the fund and will in exchange get new shares. Subsequently it can sell these shares on the open market making money (remember the shares were trading above the value for Bitcoin on the open market).

1 share in the fund will always represent 0.2 BTC (unless they do a share split) and if more Bitcoin are deposited into the fund more shares will be given out (without diluting shareholders!). Reversely, a market maker can also buy shares in COIN and subsequently redeem these in exchange for the underlying Bitcoins (also per basket). It will do so when the market price of COIN is below that of Bitcoin (and subsequently they can sell the received Bitcoins on the open market to complete the arbitrage cycle).

Thanks, wachtwoord, that's very educational.

BTCtrader71

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Quote from: wachtwoord on July 11, 2014, 01:21:03 PM

The above is complete nonsense.

Compelling analysis. I'm glad you shared this insight.

Or as Ron Burgundy would say ...
https://www.youtube.com/watch?v=pnvHGaHl04o&feature=kp

wachtwoord

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Quote from: ImI on July 11, 2014, 07:53:10 PM

Quote from: wachtwoord on July 11, 2014, 06:17:04 PM

Quote from: wachtwoord on July 11, 2014, 06:17:04 PM

If more btc has to be bought or sold to balance out when does it happen? In real time during the trading day? End of trading day? Or just when the winks feel they need to buy or sell a bunch?

The fund does nothing. Certain big players are allowed to either add buckets of Bitcoin to the fund in exchange for shares or redeem shares in exchange for Bitcoins. Whenever the price of the fund doesn't match the price of Bitcoin in the overall market this will be an opportunity for arbitrage for these players. We let the free market do the rest and presto, the price will follow the market price with a very narrow error margin.

Ok, thats basically like another exchange and every buy in the ETF equals a buy on a regular exchange.

No it doesn't. The shares are traded and can go up in value. If the value of a share is larger than the value of 0.2 BTC and there is sufficient liquidity a market maker will arbitrage, buy a number of Bitcoins (with the number as defined basket size in the filing) send these to the fund and will in exchange get new shares. Subsequently it can sell these shares on the open market making money (remember the shares were trading above the value for Bitcoin on the open market).

1 share in the fund will always represent 0.2 BTC (unless they do a share split) and if more Bitcoin are deposited into the fund more shares will be given out (without diluting shareholders!). Reversely, a market maker can also buy shares in COIN and subsequently redeem these in exchange for the underlying Bitcoins (also per basket). It will do so when the market price of COIN is below that of Bitcoin (and subsequently they can sell the received Bitcoins on the open market to complete the arbitrage cycle).

ImI

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If more btc has to be bought or sold to balance out when does it happen? In real time during the trading day? End of trading day? Or just when the winks feel they need to buy or sell a bunch?

The fund does nothing. Certain big players are allowed to either add buckets of Bitcoin to the fund in exchange for shares or redeem shares in exchange for Bitcoins. Whenever the price of the fund doesn't match the price of Bitcoin in the overall market this will be an opportunity for arbitrage for these players. We let the free market do the rest and presto, the price will follow the market price with a very narrow error margin.

Ok, thats basically like another exchange and every buy in the ETF equals a buy on a regular exchange.

wachtwoord

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Quote from: vuduchyld on July 11, 2014, 04:18:45 PM

If more btc has to be bought or sold to balance out when does it happen? In real time during the trading day? End of trading day? Or just when the winks feel they need to buy or sell a bunch?

The fund does nothing. Certain big players are allowed to either add buckets of Bitcoin to the fund in exchange for shares or redeem shares in exchange for Bitcoins. Whenever the price of the fund doesn't match the price of Bitcoin in the overall market this will be an opportunity for arbitrage for these players. We let the free market do the rest and presto, the price will follow the market price with a very narrow error margin.

Alley

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If more btc has to be bought or sold to balance out when does it happen? In real time during the trading day? End of trading day? Or just when the winks feel they need to buy or sell a bunch?

wachtwoord

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Quote from: wachtwoord on July 11, 2014, 03:58:50 PM

Haha, yes I agree about holding actual assets

. I don't think most people that frequent this forum need this ETF (although maybe some for US tax advantages). The rest of the world however is a different story altogether Wink

Indeed! And seriously, thank you for giving me the impetus to do some reading today. It was educational!

I'm happy you found my comments useful in some way

vuduchyld

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Quote from: wachtwoord on July 11, 2014, 03:58:50 PM

Haha, yes I agree about holding actual assets

. I don't think most people that frequent this forum need this ETF (although maybe some for US tax advantages). The rest of the world however is a different story altogether Wink

Indeed! And seriously, thank you for giving me the impetus to do some reading today. It was educational!

wachtwoord

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Haha, yes I agree about holding actual assets

. I don't think most people that frequent this forum need this ETF (although maybe some for US tax advantages). The rest of the world however is a different story altogether Wink

vuduchyld

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Quote from: wachtwoord on July 11, 2014, 02:41:55 PM

Quote from: vuduchyld on July 11, 2014, 02:40:08 PM

Quote from: wachtwoord on July 11, 2014, 01:21:03 PM

The above is complete nonsense.

Compelling analysis. I'm glad you shared this insight.

Okay let me spell of it, the above post word for word is incorrect. Invert the post and you get close to the truth. ETFs are backed with the underlying (legally) and in particular for the Bitcoin one this will be very easy to prove by auditing.

So, in other words:

M'i ton erus tuoba siht, tub, I t'nod eveileb siht si tcerroc. E'vi dleh eht DLG and VLS sFTE erofeb....oh, never mind....

(Good to know that in inverse world, I must be holding some GLD shares, but no silver, either in ETF or physically-backed shared.)

I have not read the filing for COIN. I have read them for GLD and SLV, and, in fact, I learned something today, so thank you for that. There are still more risks in holding the ETFs as compared to the actual assets:
http://solari.com/articles/Precious_Metals_Puzzle_Palace/
http://www.theaureport.com/pub/na/5817

but GLD and SLV seem to have more safeguards in place than many ETFs/ETNs, etc...

wachtwoord

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Quote from: vuduchyld on July 11, 2014, 02:40:08 PM

Quote from: wachtwoord on July 11, 2014, 01:21:03 PM

The above is complete nonsense.

Compelling analysis. I'm glad you shared this insight.

Okay let me spell it out, the above post word for word is incorrect. Invert the post and you get close to the truth. ETFs are backed with the underlying (legally) and in particular for the Bitcoin one this will be very easy to prove by auditing.

vuduchyld

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Quote from: wachtwoord on July 11, 2014, 01:21:03 PM

The above is complete nonsense.

Compelling analysis. I'm glad you shared this insight.

wachtwoord

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Quote from: NapoleonBonaparte on July 11, 2014, 01:25:51 PM

Quote from: vuduchyld on July 11, 2014, 09:43:41 AM

Quote from: Asrael999 on July 02, 2014, 05:01:56 AM

Quote from: transient858 on July 02, 2014, 12:45:53 AM

Quote from: vuduchyld on July 11, 2014, 09:43:41 AM

Only 1 million shares. Small float = easy manipulation

Pump and dump time

Having access to wall street money, who really know how high bitcoin will go.

Yeah they'll pump it then dump it. Leaving all retail bagholders in tears. Seen it all the time in pennystocks

ETF's do not work like that -if more than one million shares are purchased the ETF issues new ones, and buys the bitcoin to hold against them. So if 3 million shares get bought they will issue another 2 million, the fund then buys extra bitcoin with the proceeds of the new share issuance so as be balanced. That way the value of the ETF share stays in line with the value of bitcoin and is not influenced by the supply and demand of the ETF share itself.

When shares are sold back to the ETF they retire them and sell bitcoin so as to stay balanced

So if the ETF gets huge swings in inflows and outflows then it will have a huge impact on bitcoin - unless insitutional market makers get involved in the real bitcoin market so as to smooth flows and volatility.

There are one million shares initially because the ETF will only own 200,000 bitcoin, and each share is worth 0.2BTC. If more than one million shares get bought the ETF will have to buy bitcoin at market. If less then they may well have to sell bitcoin.

EDIT:

Lets not forget though that to be fully funded at inception or close to inception, ie all one million shares bought, this ETF needs to sell the equivalent 200,000 coins to interested parties , thats USD 130,000,000 at current prices, - and we just had a little panic about 30,000 coins going at auction.

I'm not sure about this, but I don't believe this is correct. I've held the GLD and SLV ETFs before (disclosure: not currently holding gold, but I do have a few hundred shares of SLV). My understanding is that the ETF managers do NOT have to maintain physical gold and silver in order to back the ETF. In the event of a price collapse, it is NOT an option for the ETF holder to request delivery of physical gold and/or silver in exchange for their shares.

I could be wrong, but I believe the ETF manager is simply required to manage the ETF in a way that the EFT price closely tracks the price of the underlying commodity.

It wouldn't take much googling to find out that there are a LOT of gold and silver bugs who will tell you NEVER to buy the ETFs because they don't have the security of the underlying commodity. If you want that security, there are other places to buy it that DO have the underlying commodity as support. Just for an example of the significant difference, check out www.silversaver.com (disclosure: I also own commodities through SilverSaver.)

All ETF are backed by something. You can not take delivery of the underlining asset in the case of ETF.

You cannot, because you're a small player, but larger third parties can. They can also do the opposite, deliver a basket of Bitcoin (or whatever the fund represents) and add it to the fund in exchange for shares. Read the filing

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Quote from: Asrael999 on July 02, 2014, 05:01:56 AM

Quote from: transient858 on July 02, 2014, 12:45:53 AM

Quote from: vuduchyld on July 11, 2014, 09:43:41 AM

Only 1 million shares. Small float = easy manipulation

Pump and dump time

Having access to wall street money, who really know how high bitcoin will go.

Yeah they'll pump it then dump it. Leaving all retail bagholders in tears. Seen it all the time in pennystocks

ETF's do not work like that -if more than one million shares are purchased the ETF issues new ones, and buys the bitcoin to hold against them. So if 3 million shares get bought they will issue another 2 million, the fund then buys extra bitcoin with the proceeds of the new share issuance so as be balanced. That way the value of the ETF share stays in line with the value of bitcoin and is not influenced by the supply and demand of the ETF share itself.

When shares are sold back to the ETF they retire them and sell bitcoin so as to stay balanced

So if the ETF gets huge swings in inflows and outflows then it will have a huge impact on bitcoin - unless insitutional market makers get involved in the real bitcoin market so as to smooth flows and volatility.

There are one million shares initially because the ETF will only own 200,000 bitcoin, and each share is worth 0.2BTC. If more than one million shares get bought the ETF will have to buy bitcoin at market. If less then they may well have to sell bitcoin.

EDIT:

Lets not forget though that to be fully funded at inception or close to inception, ie all one million shares bought, this ETF needs to sell the equivalent 200,000 coins to interested parties , thats USD 130,000,000 at current prices, - and we just had a little panic about 30,000 coins going at auction.

I'm not sure about this, but I don't believe this is correct. I've held the GLD and SLV ETFs before (disclosure: not currently holding gold, but I do have a few hundred shares of SLV). My understanding is that the ETF managers do NOT have to maintain physical gold and silver in order to back the ETF. In the event of a price collapse, it is NOT an option for the ETF holder to request delivery of physical gold and/or silver in exchange for their shares.

I could be wrong, but I believe the ETF manager is simply required to manage the ETF in a way that the EFT price closely tracks the price of the underlying commodity.

It wouldn't take much googling to find out that there are a LOT of gold and silver bugs who will tell you NEVER to buy the ETFs because they don't have the security of the underlying commodity. If you want that security, there are other places to buy it that DO have the underlying commodity as support. Just for an example of the significant difference, check out www.silversaver.com (disclosure: I also own commodities through SilverSaver.)

All ETF are backed by something. You can not take delivery of the underlining asset in the case of ETF.

wachtwoord

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Quote from: Asrael999 on July 02, 2014, 05:01:56 AM

Quote from: transient858 on July 02, 2014, 12:45:53 AM

Quote from: Asrael999 on July 02, 2014, 05:01:56 AM

Only 1 million shares. Small float = easy manipulation

Pump and dump time

Having access to wall street money, who really know how high bitcoin will go.

Yeah they'll pump it then dump it. Leaving all retail bagholders in tears. Seen it all the time in pennystocks

ETF's do not work like that -if more than one million shares are purchased the ETF issues new ones, and buys the bitcoin to hold against them. So if 3 million shares get bought they will issue another 2 million, the fund then buys extra bitcoin with the proceeds of the new share issuance so as be balanced. That way the value of the ETF share stays in line with the value of bitcoin and is not influenced by the supply and demand of the ETF share itself.

When shares are sold back to the ETF they retire them and sell bitcoin so as to stay balanced

So if the ETF gets huge swings in inflows and outflows then it will have a huge impact on bitcoin - unless insitutional market makers get involved in the real bitcoin market so as to smooth flows and volatility.

There are one million shares initially because the ETF will only own 200,000 bitcoin, and each share is worth 0.2BTC. If more than one million shares get bought the ETF will have to buy bitcoin at market. If less then they may well have to sell bitcoin.

EDIT:

Lets not forget though that to be fully funded at inception or close to inception, ie all one million shares bought, this ETF needs to sell the equivalent 200,000 coins to interested parties , thats USD 130,000,000 at current prices, - and we just had a little panic about 30,000 coins going at auction.

I'm not sure about this, but I don't believe this is correct. I've held the GLD and SLV ETFs before (disclosure: not currently holding gold, but I do have a few hundred shares of SLV). My understanding is that the ETF managers do NOT have to maintain physical gold and silver in order to back the ETF. In the event of a price collapse, it is NOT an option for the ETF holder to request delivery of physical gold and/or silver in exchange for their shares.

I could be wrong, but I believe the ETF manager is simply required to manage the ETF in a way that the EFT price closely tracks the price of the underlying commodity.

It wouldn't take much googling to find out that there are a LOT of gold and silver bugs who will tell you NEVER to buy the ETFs because they don't have the security of the underlying commodity. If you want that security, there are other places to buy it that DO have the underlying commodity as support. Just for an example of the significant difference, check out www.silversaver.com (disclosure: I also own commodities through SilverSaver.)

The above is complete nonsense.

vuduchyld

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Quote from: transient858 on July 02, 2014, 12:45:53 AM