Bitcoin Forum

Hi,

I keep reading about the possible ETF SEC approval, but could anyone explain to me what it means? It means exchange traded fund, but there already are bitcoin exchanges in the US right? I'm confused.

Sure, an exchange traded fund is a mutual fund that trades within the day. This allows greater liquidity of an investment that has inherently more diversity (and less risk). All mutual funds trade once a day - at the end of the day the price is calculated and set and that becomes the buy price for the next day. Exchange traded funds (essentially) mutual funds that trade throughout the day.

For bitcoin this is a big deal ONLY because it represents a fund that can be purchased with fiat that's invested in bitcoin. It eliminates the need to actually own bitcoin. So, in theory if you're not worried about owning bitcoin your self there's no need to be invested in a bitcoin ETF.

So basically it means mutual tech funds can add bitcoin to the portfolio.

https://coincenter.org/link/a-new-nyse-traded-bitcoin-etf-if-about-to-give-the-winklevoss-bitcoin-trust-a-run-for-its-money

Yeah such as polo and kraken are based on the US.

I think I get it now, thanks for your replies :)

Bitcoin price keep on rising in the past few days, is there a big possibility bitcoin ETF gets SEC approval?

I'm a little late to reply, but someone else might be looking at this topic for answers.

I posted on the bitcoin reddit recently about this. You can see it here (https://www.reddit.com/r/Bitcoin/comments/5v398j/can_anyone_do_an_eli5_on_the_bitcoin_etf/).

Top comments are:

Basically, ETFs are entities that manage money for you

They are pretty much the same as personal money managers in regard to what they do (i.e. manage your money), but they are more regulated in respect to which markets they are allowed to trade on, i.e. in which assets and financial instruments they can invest the money of their clients. People are using these if they can't trade on their own since they might not have enough expertise or just be busy doing something else. Consequently, Bitcoin ETFs are the money management entities which would be investing in Bitcoin and Bitcoin derivatives (such as futures and options)

An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, more like stocks. I think bitcoin hits the record on high ETF approval expeculation.

Assuming that you also don't know, from your location you are from Netherlands (Europe), about the US Securities and Exchange Commission (SEC) which objectives are to protect investors, to maintain fair, orderly, and efficient markets and to facilitate capital formation according to investor.gov (https://www.investor.gov/introduction-investing/basics/role-sec). The SEC was formed in 1934 that is, five years after the 1929's crash and some people liken it like the Watchdog of Wall Street and some others as the “Capital Markets Cop.” (http://www.investopedia.com/articles/investing/112914/understanding-sec.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186) So the bitcoin ETF must be approved by SEC

Let's put it in layman terms:

An ETF is just something hyper regulated and correct and compliant with all laws so old people and in general idiots that don't know how to buy and hold their own bitcoin, can still hold bitcoin.

So all the people can get in and this is fantastic, since a lot of money will come in, we are looking at x10 price.

That's basically the reason why this kind of ETF is not going to get approved soon. It is the same reason why big-time investors of George Soros and Warren Buffett caliber are staying away from Bitcoin altogether. They are seasoned speculators (but that you should know even without me telling you), and they know if they buy bitcoins in any amounts which would match their interests, that will inevitably cause the price to spike and folks will be happy to sell their bitcoins to them and they won't be able to book any profits

If anyone wants to make a bet on this (i.e. whether the Bitcoin ETF gets approved or not), you are welcome

This is a good question, and it's not answered simply by knowing that the Winklevoss boys are opening a Bitcoin base ETF. We'd have to read the filing with the Securities and Exchange Commission (SEC), the group that gives approval for investments to be made available to the public. It's likely that their approval only applies to this one fund. Which means that existing ETFs cannot just buy and hold bitcoin.

ETF is exchanger regulator in USA
i hope is approval too, only very influential USA exchanger, USA exchanger coinbase, poloniex, and bittrex
but if result not good can affect to bitcoin price

These two statements are not related, there is not "the same reason".



Soros and Buffet stay away from Bitcoin because bitcoin has no fundamentals upon which either of these professional investors can justify a decision to buy. Bitcoin is a foreign concept and it's very new and it's very risky. Guys like Soros and Buffet wouldn't dare hint at buying bitcoin until there's some certainty and less risk associated with it. BUT, it's quite possible that either of them does own some Bitcoin...both of these guys like to make money. And bitcoin is making us all some money.

ETF does not trade only cryptocurrencies, therefore ETF is not a crypto exchange or FIAT-exchange, so don't confuse online exchanges with ETF. If bitcoin is officially accepted by  ETF, if BTC receives regulatory approval from USD ETF, the things for all the bitcoin owners will become interesting :). Hope this fuzz brings us toward USD ETF's approval!
You can read some more on Wikipedia for start.
https://en.wikipedia.org/wiki/Exchange-traded_fund

This comment is informative especially for us not very familiar with finance. You mentioned that it wouldn't require me to actually own bitcoin. So this means it would be possible to get this in banks? I remember now, I have this thing with my local bank where I'll deposit a fixed amount of money for 5 years. Forget what they called the package but it's definitely not a time deposit.

You are free to disagree but I'm going to stick to my guns, so to speak


While what you say could have some bearing on Buffett's decisions, but this is certainly not true in respect to Soros. Buffett is known for his overall hostility toward new developments as well as technical innovations and not because there are no fundamentals in Bitcoin (which is debatable per se), but Soros is not so much an investor (in the sense of the word which best describes Warren Buffett's approach) as die-hard speculator. He doesn't care whether some asset has fundamentals or not as long as he can raise enough profits. And what I say makes perfect case in this regard. He doesn't invest in Bitcoin since Bitcoin is too small for him and there are just not enough fools to strip their money off of them

Remember, profits always trump prophets

I will mention again, SLV and GLD are ETFs for gold and silver.
They are almost universally considered to be bad for the price of silver and gold as they trade paper metals, instead of the actual metals.

That means you can print a new 100million ounces and sell them, you just have to say that you have the metal to back up the paper. I bet it is not 100% covered though, there is some fractional reserve going on. That could happen with Bitcoin too, so the initial joy of having an ETF could lead to a long term downward pressure on the price.

You seem to be conceptually mistaken

There cannot be any kind of fractional reserve going on behind the scenes since paper gold and silver in these ETFs are not supposed to be converted into physical metal right from the start. It is the same with precious metals derivative markets (which such ETFs also belong to), i.e. there are physically settled futures and there are cash-settled futures. If you buy the latter, you don't get any gold when the futures expiration time comes, but they are originally meant like that. If you buy physically settled futures and want gold delivered to your vault (actually, to a vault in a specialized bank), you will get your metal since otherwise that would mean default of the exchange

ETFs are traded on stock exchanges, they can be bought and sold at any time during the day. Their price will fluctuate from moment to moment, just like any other stock's price, and an investor will need a broker in order to purchase them, which means that he/she will have to pay a commission.

An ETF in this context would trade Bitcoin back and forth and use multiple methods such as shorting, on top of going long, to build investment wealth for the ETF and the people who invest in it.

Think of it like a fund that trades Bitcoin for you, so you put in $100 and, if they make 5%, you get close-ish to 5% on your investment, making you now have somewhere close to $105, after fees are taken of course.

Typically they outpace inflation and are actually pretty good, but a lot of variables can affect profitability.