Topic: Winklevoss Twins File to Launch Bitcoin Exchange-Traded Product - page 6. (Read 8507 times)

A nice scam.

If the demand drives the price higher than the NAV then the sponsor will deposit an additional basket of 10,000 BTC with the trustee and trustee will issue 50,000 new shares.   The trust has now grown by 10,000 BTC and has 50,000 more shares outstanding so each share still represents 0.2 BTC.

Before:
200,000 BTC in trust
1,000,000 shares outstanding
NAV per share 0.2 BTC (200,000 BTC / 1,00,000 shares)

After
200,000 BTC in trust + 10,000 BTC deposited = 210,000 BTC in trust
1,000,000 shares outstanding + 50,000 newly issued shares = 1,050,000 shares outstanding
NAV per share 0.2 BTC (210,000 shares / 1,050,000 shares)


Those shares can then be sold on the market at the current price (higher than NAV) increasing supply, lowering excess demand and moving the price towards the NAV.Note there is an economic incentive here as the newly issued shares only cost 0.2 BTC each but can be sold for more than 0.2 BTC how much more depends on how much of a demand premium is being offered by buyers.

Of course institutional investors can do the same thing so if the sponsor doesn't act then someone else will and scoop up that risk free arbitrage. The process can also be completed by selling 50,000 shares short (sold at price > NAV), deliver the underlying asset to the trustee, collect 50,000 newly issued shares and cover the short with newly issued shares (buy @ NAV).  The institutional investors picks up the difference as profit.

Sure, they are bulls in denial; grasping every last straw of hope for a news that will make the price rebound.
 

LOL, Winkl-evil's on Bloomberg, "Winklevoss Twins Make the Best Case Against Bitcoin", pure genius at work: http://www.bloomberg.com/news/2013-07-02/winklevoss-twins-make-best-case-against-bitcoin-fund.html

TL;DR:

Wow so they are selling ALL their coins for a maximum amount of Fiat dollars and some find that its good news..

Deferred taxation on the profits on their stash
Avoiding slippage selling on the exchange
Management fees for the trust

Maybe Feds are shutting down exchanges so they can control twins & bitcoin

sell ur house take a loan and buy bitcoins 

Man this news is massive.. It's broken on so many major news outlets. It's been ages since any bitcoin news did that.

Thats mean that they actualy dont have any money and loose hight ammount of USD on april bubble

This story is spreading, now on bloomberg tv headlines.

I'm interested to see how they will handle expansion if institutional money moves in and buys out all $20 mill straight away. What is their profit model from all of this?

That's only 20 baskets of coins, I guess their rich friends and relatives already bought them all 

Since the face value is $100 per coin, an investor might consider direct buy at MTGOX, in case he have enough IT knowledge

I think you read too much in this move. Its just a way for the Winklevoss to profit, while trying to become some kind of "market makers" supported by their toilet paper ETFs, like JPMorgan does in the silver market for example.

Oh please let this happen, I want to buy 2100 BTC for $10k please

this looks like an incredibly smart way to sell out of a lumpy position in bitcoin while avoiding the illiquidity of mtgox and the limited size of the order book. With daily volumes on gox of what 50K? there is no way they could sell their bitcoin holdings in a reasonable timescale on that market without seriously impacting the price.
By launching an ETF they ideally attract new capital into the market to hold these bitcoin, the ease of ownership and the ability to buy via brokerage accounts makes this a far simpler method for individuals to acquire bitcoin holdings than setting up a wallet and going through all the fuss of creating an account at one of the exchanges and then waiting days/weeks for the FIAT to move to the right place so that you can actually buy the bitcoin. If they can parley the ETF into a BTC lending business as well then they can probably earn sufficient additional BTC to make dividend payments viable on the ETF as well.
Hell the right sort of ETF might even work for pensions and other tax efficient savings.  Who knows what 1% of your pension pot in BTC might be worth in 20years.

If they can get the ETF off the ground it has the potential to make BTC a real investment option for the general public - which could provide a real impetus to drive the price of bitcoin up. But if this ETF fails and those BTC have to be sold on the exchanges because the twins choose to sell their excess BTC, well then hitting the exchanges in 100,000 bitcoin? - That's going to put a serious dent in the price.

They should keep buying BTC to stabilize the price if they know what's good for their fund 

The other question that pops into my mind is what if, what if the Winklevii don't have the BTC to back it.

Seems unlikely... but according to the press they only had $10Million back in April (during the bubble!)

That doesn't equate to 200k worth today.

If they didn't have more, doesn't that mean the trust's would need to buy BTC?

That would inevitably cause a price rally

Any price change on Gox is likely to be reflected in the ETF.

Similarly if people want to buy on the ETF, they'll effectively end up buying from Gox.

I think we'll see what the real deal is when NY wakes up.

Personally I think this is the biggest news for BTC in a while, it opens it up to a whole new market, a market where people have serious coin

I dont actually belive this. But one could argue that goxxers will remove their bids and buy the etf if gox rallies, making the etf functionally the same as a gox dump.