Topic: Winklevoss Twins File to Launch Bitcoin Exchange-Traded Product - page 2. (Read 8507 times)

Not everything has to be done because it will be "better". This is a free country, bitcoins were designed in part to allow more freedom in money, if these people want to use bitcoins in this manner it will not hurt you so why not let them try to make a little money this way? Or are you just jealous you didn't think of it and/or have the resources to pull it off first?

Interesting article, unusual risks of investing in the Winklevoss bitcoin ETF

http://qz.com/99632/winklevoss-bitcoin-etf-risk-factors/

No they didn't. It was never their idea, they never touched it nor did anything with it. They waiting until it was a multi billon $ company then qq'ed.

My first instincts on hearing about this ETF are that its a bad idea.

 because the idea behind bitcoins is that you don't need derivatives to represent bitcoins, you just own the 'real' bitcoins. Why let someone else ever hold your bitcoins when you can do it your self. This is also why I don't like Ripple gateways and bitcoin transactions in the ripple network and why you don't need a bank.

If we want to attract more people into bitcoins we need easier ways to get actual bitcoins, not paper certificates.

People supporting the ETF seem to be mainly saying it will be great for bitcoins because it'll attract big money. Maybe bitcoins shouldn't be in too much hurry to attract big money. No need for impatience. I distrust ETFs because of things I've heard about GLD and SLV. In the small print of those ETFs it says something along the lines of 'we don't have to redeem any metal and can pay you in fiat'. I've heard people with shares in GLD own 100 times more paper than there is real metal. Net effect of these ETFs is that the money supposedly going to investing in gold is actually being diluted 100 times into paper.

If the WinkleBros can proove they have the bitcoins backing the ETF then it makes it better I guess, but I'm still a bit uneasy about the idea myself.

PS anyone with large holdings of coins should be doing this at a smaller scale. Forming a business whose assets are 100% bitcoins then piecing out shares to investors and imposing a frictional cost to buying and selling.

But at least they seem to have an idea what will succeed or not?  They had some insight to think that Facebook would work.

So I guess I am pulling for them on this one for sure! 

This is just a different spin on the same practice. In order to benefit from it going down you are either going to need to (A) borrow the share right now, sell it, re-buy it and pay back the loaner, or (B) write calls or (C) buy puts. You could also (D) troll the settlement time, but thats a different deal. Sure, technically you aren't going to have to 'borrow' from the buyer of your call, but you still need someone else as the buyer of the option, who effectively serves as your lender. By borrowing from someone I mean have someone on the other side of the trade that knows I am shorting and can obviously view the market depth of those options.

Wrong!

Um, somebody has to be there to lend you the ETF in order for you to be able to short it. Whoever lends you that ETF. What are you going to cause the issuance of more ETF only to short it? I suppose you could be a bank and accept 'deposits' in BTC, which would allow you to do so, only thats contingent upon somebody actually depositing btc.

In order to short BTC, you have to be able to borrow BTC/ETF. Who is going to be loaning you that BTC/ETF? With Gold, its easy: You issue shares of the GLD, buy some gold miner, issue gold futures on that gold miner, 'loan' those futures to yourself to back your ETF, then sell your ETF.

With Bitcoin, even assuming there is such a thing as Bitcoin futures, its clearly a lot harder, or at least a lot easier for people to tell you are trolling big time. There is basically a fixed amount of BTC created every period of time, so if the futures exceed that expected supply, then they essentially go into backwardation for that amount. Thus, assuming people aren't idiots, the worst thing that they could possibly do is, until the next halving, up the perceived supply of bitcoins by the amount of Bitcoins that would be mined until the next futures expiration date. And then, once the next halving day happens, they can't loan themselves enough futures to make up for their debts, and then they actually have to pay back their uncovered shorts (well, half of them) which will either cause (A) the bitcoin price to exceed that at the time the shorting began in the first place by the interest over that period PLUS the backwardation over that period of time PLUS any amount the price got bid up just before the halving day OR (B) they forclose, and screw over their future contracts, causing a whole bunch of people that thought they'd have BTC to no longer have it, and now need it, causing major contraction in Bitcoin supply, causing the same end result.

With Gold, there is actually times where they can literally short the futures and randomly make money from it (due to contango). Why? Because there are a TON of futures that will only constantly be rolled into new futures and nobody will ever know. Silver is even worse.

http://www.cmegroup.com/trading/metals/precious/silver.html

OUCH

For being so rich and famous, this is soooo stupid.

Yes, indeed.  They can block the GLD funny-business if they choose to.

If the Winklevoss twins don't do this for their ETF, somebody will surely launch one (or try to launch one) that does.

What would be weirdest, though, would be if the SEC approves an ETF that doesn't sign proof of ownership (the Winklevoss' or another) and somehow never gets around to approving the application of an ETF that does sign proof of ownership, or keeps coming up with lame excuses for rejecting it.

At least, if I were Ben Bernanke, that's what I'd orchestrate.

The other disconcerting possibility is double-counting coins held by an exchange (such as Gox).  Since none of the exchanges publish proof-of-ownership for their deposit base the proof of ownership for those coins is available for "lending" out to ETFs.

Nice thing about Bitcoin is it would be possible to provide cryptographic proof of ownership.  Move coins to holding addresses (with encrypted private keys in vault).  Since redemption and issuance is always in basket of 50,000 shares (1,000 BTC) it would make sense to use 1 address = 1 basket.

Provide public addresses and digitally sign a message stating ownership with private key.

The digital signature provides irrefutable proof the trust has ownership of the private key.
The blockchain provides continual audit that the coins haven't been spent/moved.
If shares are redeemed or new shares are issued that is also provable.

Essentially at all times the number of BTC in digitally signed holding addresses should always reflect NAV (initially 0.2 BTC) * shares outstanding.

If the paper Bitcoins trade at higher than actual Bitcoins one can instantly collect a risk free profit.

Example:  1 share = 0.2 BTC.  The average bid for depth of 50,000 shares is currently 0.21 BTC (obviously it will be in USD but 0.21 BTC equivalent).

Sell short 50,0000 shares @ 0.21 BTC
Deposit 10,000 BTC with trustee
Trustee issues 50,000 new shares
Use new shares to cover short.

Net-net bought @ 0.20 BTC, sold @0.21 BTC.  Gain 0.01 BTC per shares * 50,000 shares = 500 BTC.

The ability for the fund to have subsequent share issue and redemption is a mechanism to "balance" the ETF and ensure it will trade very close to NAV.

As much as I love the idea of Bitcoin ... but the Wankervoss Twins are the #1 reason why I wish Bitcoin to fail.

yea I wouldn't trust it without evidence no matter legal requirements - banks have settled with cash as they didn't have the gold they were supposed to.

Without massive amounts of investment there wont be enough market capitalization to create any jobs.

When a Bitcoin is worth a few thousand each then there will be more jobs but when they are worth only $100 it's only a billion dollar economy so there are no jobs. Basically you gotta have investors before you can start businesses which is where the jobs come from.

isn't anyone starting thinking that the Winklevoss brothers have a natural talent for getting the business "almost" right and yet never really make it?

NB: no trolling intended, just a joke. I am holding a big bag of coins like many here (and nope I am not selling).

Okay first off, I hope you realize that this sort of thing has never not looked ridiculous.

JP Morgan isn't the issuer of paper silver - they're just a third party who has a lot of money to short it with. Like, I'm not saying people aren't going to do that with this ETF, but you're comparing apples to oranges if you say the issuers here are doing the same thing as JP Morgan is doing.

And as an aside, I don't care about whether this pushes the price up or down. That's not the point. The point is so that BTC - or paper that performs roughly like BTC - can integrate with the traditional infrastructure for regular people (e.g. in IRAs).

There is if you've got enough of them - that's right in the prospectus. Admittedly, that's not so useful for a small investor, but "needs to be redeems in a big batch" is a long way from "totally irredeemable".

This. And I really hope they do that once the ETF is sold on an exchange and the majority of the shareholders care about checking this from time to time.

Even if it's a way for these guys to sell their bitcoins, it's a way for other people to buy some without having to fear lost passwords, having relied on the wrong encryption schemes or other technical stuff.

there has been talk recently that ALL markets are manipulated so a BTC ETF will be the same, just hope it's manipulated upwards.