Bitcoin Forum

http://www.entrepreneur.com/article/230346

Wall Street is getting ready to dive into Bitcoin, pouring vast amounts of institutional and investor money into the digital currency that has been labeled a "bubble" by former Federal Reserve chairman Alan Greenspan and which not long ago was seen as the sole preserve of crypto-geeks, monetary-theory wonks and anti-government types.

So says Barry Silbert, founder and chief executive of SecondMarket, the online platform that allows its users to trade private company stocks. "We're three to six months away from Wall Street dollars moving into Bitcoin in a big way," he says.

Silbert should know: Earlier this fall, he launched the Bitcoin Investment Trust, the first investment vehicle allowing institutional investors to put money into the Bitcoin market while avoiding the hassle of personally holding the currency. The trust is open only to accredited investors, and the minimum investment is $25,000.

Speaking on Tuesday night at a private dinner for Bitcoin cognoscenti in New York, Silbert said he was astonished by the BIT's performance. "We launched six weeks ago and we're up to $70 million. That blows my mind. We were hoping to get to $10 million by the end of the year."

The value of the BIT derives entirely from the price of Bitcoin; it has benefited in recent weeks as Bitcoin soared north of $1,200. Because of a recent dip, the net assets of the trust now stand at about $63 million, which means it is holding that dollar value in bitcoins.

Related: SecondMarket Establishes New Bitcoin Trust for Accredited Investors

Silbert says he meets frequently with hedge fund workers, traders at large financial institutions and others who want to gain a better understanding of digital currencies and figure out how to capitalize on them. He reckons that Wall Street will enter the Bitcoin market in roughly three waves. The first is already beginning, and it's taking the form of IRA money. Customers with self-directed IRAs at Fidelity, Pensco Trust Company, The Entrust Group and Millenium Trust Company are now able to invest some of their money in Bitcoin via the BIT. Silbert expects most other IRAs to approve the BIT as an investment vehicle before the second quarter of next year, in response to growing interest from their customers.

Also in this first wave will be clients of the wealth-management arms of Wall Street banks. Silbert says the BIT is in conversations with "several major banks" and he expects the trust to be an approved product on their wealth-management platforms within the first half of 2014.

The second wave will be hedge funds and other institutional investors. "The principals that work at all those firms are starting to invest personally in the BIT," Silbert says. Anecdotally, he adds, it's clear they are investing in the Bitcoin market through other platforms as well. With traders, portfolio managers and executives all gaining interest, it appears to be only a matter of time before their firms follow suit and take a position in the digital currency.

The third wave will be Wall Street banks themselves, motivated purely by profit, says Silbert. "These banks already have large teams trading dollars and euros and yen and gold. Ultimately, Bitcoin is no different than those" as far as forex and commodities traders are concerned, he says. And indeed, currency strategists at Bank of America issued a note to clients last Thursday talking up Bitcoin's potential and analyzing its fair market value.

While most institutional investors are keeping mum on Bitcoin for the time being, the head of one firm has been outspoken about his faith in the cryptocurrency. Michael Novogratz, the co-chief investment officer of macro funds at Fortress, plumped for Bitcoin at a conference held in New York on Oct. 24. He recommended that investors "put a little money in Bitcoin," saying its value would appreciate significantly over the next few years.

At the time, the price of a single bitcoin was less than $200 on most exchanges. "I have a nice little Bitcoin position," Novogratz said at the conference. "Enough that I'm smiling that it doubled." One can imagine how that smile must have widened in the weeks since.

But it's hard to say where the price will be a month or six months from now. Although right now Silbert is happy to see Bitcoin performing above his expectations, in the near term "the price volatility is only going to get worse," he says. "We haven't seen anything yet."

He added, "Once Wall Street starts putting money into Bitcoin -- we're talking about hundreds of millions, billions of dollars moving in -- it's going to have a pretty dramatic effect on the price."

Yeah, once they all want a piece of the pie 10k could get eaten pretty quick. I wonder what pressure is going to get put on the core developers once the weight of the global financial markets starts to lean on a small open source program?

lol, this is coming from 2nd Market CEO, not reliable.

I was wondering where this information was coming from. What is 2nd market and why is it not reliable?

I find it hard to believe that any legitimate financial intuition will allow peoples retirement fund to be put into Bitcoins.

Why?

I find it hard to believe that you were around during single-digit BTC prices and are not retired on an island somewhere.

This is just an advertisement / press release on behalf of his platform, published on what looks like a source that is not reputable.

I wouldn't say it's a big fat lie. Just unsubstantiated advertising.

If I opened a widget trading platform, I'd be shouting from the rooftops that widgets were the next big thing, too.

Dude, have you ever stopped and thought that MAYBE, JUST MAYBE the ideas that are in your head that make things about Bitcoin seem "hard to believe" are false ideas? That maybe you are wrong, have been wrong and if you continue to not reevaluate your thoughts, are going to continue to be wrong?

I read that whole thing you wrote about "I would have bought if Bitcoin had gone back to $1". You know what?  The REASON it didn't go back to $1 is because everyone wanted it at that price. Just like LTC didnt go back to $1 a couple of months ago.  Because everyone wanted it at that price.

To make strong investments you have to be slightly ahead of the curve and your "ideas" limit you from doing that. Its a real shame.

Instead of admitting that you had "false" ideas and make bad decisions because of it, you just cling on to your same old ideas and waste your time on here.

The fact that you can't believe that "any legitimate institution" would allow Bitcoin investments and that you havent heard of Second Market, well, it just shows how little you truly know about BTC.

He's not hyping. Fidelity clients can invest through Second Market as of today. And some other large funds as well. I think he is being honest about what he is saying. Is he optimistic? Sure, but with the massive influx of funds theyve gotten so far, why shouldnt he be?

You betting against Wall Street coming into Bitcoin? If so, ok, but I'll bet the other side of that.

You misread what I said. I said nothing about the question of Wall Street -- only about who is doing the talking and why.

I agree, these type of wallstreet guys always meet up with their friends who are also in the same type of business.

His friends are obviously going to ask him about his type of work and show interest in it because the guy just  made fortunes with the run to $1000.

Are these other hedge fund guys really going to start putting large portions of their clients money into bitcoins, probably not.

Especially with the price of bitcoin slowly dropping from high of 1200's to now 800's. Doubtful that any of them are going to consider bitcoin a good investment when it was only $13 dollars earlier this year.

the thing you new guys need to understand is that when btc was single digits we actually had to convince ppl that conning someone out of btc was illegal and immoral. that is, it was NOT the same as doing so on eve online or some other video game currency. and there were few legal ways to spend.  no gyft no bitpay with 10k merchants.  with that perspective you may start to understand why early adopters were not investing 10k usd and early miners were happy to get 2 to 10 bucks per coin.

There is a thing called vision.

Not large portions, but 1-3%? Sure, why not. That's all we need for a huge increase in price.

Yup, those times were a lot different. Plus a fall from $30 to $2, when just months before bitcoin was fractions of a pennies. I mean, you literally could buy thousands for almost nothing. A $1.00 seemed to be where it would finally stabilize at. A good bet to almost double your coins than buying at $2.00.

It is easy to say now when bitcoin is $1000 a coin that I was crazy not to buy in the single digits.

The recent booms were partly because years passed and the government didn't shut it down, it didn't get hacked etc. There were all things to worry about at the time. You sure wouldn't want to throw 10K into it.

 Although, I still think the prices right now are unsustainable.

Why isn't the value of Bitcoin going up quickly right now?

Bitcoin got 25x more media attention last week than ever before, public awareness is skyrocketing, everyone from Coinbase to BTC-E to Bitpay are saying they are seeing drastic increases in the number of people signing up for their services and investing money in the Bitcoin economy, etc.  Yet the value is going down the last couple days?

Are people with a ton of Bitcoin slowly selling theirs, making this a type of Ponzi scheme after all?  Or are people simply cashing out already because they are having second thoughts?  I am just confused from an economic standpoint as to how a ton of new money can be streaming in, yet prices are going down. 

right now as we speak , price is falling but only because of some kind of playing with market.
We will rise again soon because of  fundamentals

what? how selling by early adopters equates ponzi in your mind? :) many people who bought cheaper are taking profits when they see the moment is right (before a serious resistance), and that same thing happens in *every* market, why the hell would that be a ponzi? do you even know the definition?

I think it's funny when people say big investment funds wouldn't put people's money into bitcoin. These are the same people who bought greek debt and collateralised sub-prime mortage products. They are insane and they have trillions.

People who have recently become surprisingly rich will naturally sell some of their bitcoins. doesn't mean they're not into the project, just balencing things out a bit. As these people get more comfortable with how many bitcoins they own they'll stop selling and the price will start creep up again. I'm guessing that there is a lot of big money waiting on the sidelines for a bottom before they start buying in. Where's the bottom before the next leg up? Who knows....

I love this! Hope you are right ;D

http://www.youtube.com/watch?v=7u4F8cpzqao

It takes time for people to research Bitcoin and learn how to store it, etc. You think people are just going to see the news and know what the hell to do to make a secure wallet? That they even comprehend what Bitcoin is after seeing it in a news article? It takes several weeks at minimum, and the price just rose nearly an order of magnitude. These are seismic wealth increases for holders so they are being sold into, as should be well expected. Do you expect an early adopter to maintain a 90% crypto portfolio, and then a 99% one, without rebalancing!? Until the media hype overpowers that effect, and it does look like this past week may be getting there (meaning a boost a few weeks from now), the price will consolidate.

I think the rise we saw to $1200 was frontrunning the development of a Bitcoin IRA through SecondMarket. This "story" is just reinforcing what everyone already knew. If those hundreds of millions actually come through, we'll see a steady increase in price over months, not some big jump.

IMO, we'll see another leap in prices when the Winkelvoss ETF is closer to launching.

Self-directed IRAs from the providers mentioned can basically invest in anything so there is no news there. You can setup an LLC and use your IRA to invest in illiquid investments like real estate. This is why it's called a 'self-directed' IRA.

Being picked up by wealth management platforms would be big news, though. I can see this happening -- I just wonder if it will be a thing for retail investors or more for private clients.

Correct me if I'm wrong.

Current market cap is roughly $900 x 12m coins = $10.8bn

To go to $10,000/BTC market cap (with current coin count) would have to be $10,000 x 12m = $120bn.

So to go to those levels we need an extra $109bn invested... suddenly wall street's 'hundreds of millions' doesn't seem so great, not even pushing us to $1000?

I must be making a mistake in the maths, please point it out.

You are assuming that every coin is bought for at least $ 10 000 dollar here, that's your mistake.

Aha!  Thanks ::) of course, the price is bought UP to $10k.  Makes sense now.

People have no idea what is a Dollar. Still, they use it everyday.

He means a pyramid scheme. I am tired of people calling it a Ponzi scheme when they mean to say pyramid scheme. Bitcoin does have some pyramid scheme aura around it based on the fact that no one knows how many coins Satoshi has, and less than 50 addresses have almost half of all the coins in existence.

It's not a pyramid scheme though because those people will spend or cash out when their coins are worth millions or billions.

Don't forget that these funds now make it more likely that we'll see fractional reserve banking in bitcoins, and options to short bitcoins using those additional funds. Regulators don't exactly have a great track record of verifying that commodity funds actually have possession of underlying assets (see gold and silver ETF's). And I doubt that the funds will be willing to disclose cold storage public addresses.

qft!

And also don't forget that it does not take 50 actual billions to move the price to 10k, it just takes as much as orderbook depth on all exchanges, and that is usually a tiny bit of the total amount of coins (right now, about 1% of coins are in asks). So the approximate amount of money needed to take us to 10k today is about 500million only. Of course, there will be crashes and new coins would be coming to exchanges once the price grows, as happens now at 1k, etc etc, so to get the actual sustained value of 10k per coin there has to be several billion incoming, not 100 though. Still pretty realistic.

Thanks for the excellent explanation.  Hopefully it will get people to stop the n × 12 million or n × 21 million calculations.

Suppose there are 10 things.  Things 1 through 9 just happened to be bought at $1 each.  According to those trades, the market capitalization is 10 * $1 = $10.  But, how much is the last one really worth?  Suppose the seller regrets selling the first 9 so cheaply.  So, they sell the last one for $100 and just so happens to find a buyer.  Now based on the last/latest sale, the market capitalization is 10 * $100 = $1,000 *but* only $109 have changed hands.

My questions is, "How much fiat has changed hands so far in the exchange of Bitcoins?"

Factor 10-100 below Market Cap.
Just check the amount of coins traded.

99% are in cold storage. It's impossible for everyone to get rich.
There isn't even enough to pay everyone 50$ per coin.

Hopefully there won't be a bankrun in bitcoin or we'll see a 99% crash.

hasnt been thus far, but (shrug)

This all seems to be a clusterfuck of misunderstanding. Second Market can take accredited investors IRA money. Including those with Fidelity. Its been that way for a while I believe. Fidelity responded to the "news" story yesterday by saying it wasn't open to their (regular) clients.

Does anyone not think that a lot of this money we are expecting to see from Wall Street and institutional investors has already invested?

I think they are already in, they got in late October to early November and that was the cause of the rally.

I have a hard time believing they are just sitting on the sidelines watching the price go up before jumping in. The price increased 10x during the rally, we started seeing $1m+ bids.

Why do we believe these articles? I think it may be possible they are already in and now are hyping it up.

I'm not saying they've put all they money they want in, but I think they are already in and have fairly significant positions (which they could use to manipulate the price if they want to put more money in). We just saw a 10x increase in price.

Check this out: http://www.youtube.com/watch?v=Tume6vspgeg

Nejc Kodric (Bitstamp CEO) in late October, says he thinks the price is rising because of institutional investors. He runs the second biggest exchange, I think he'd have a pretty good idea.

I wait eagerly for them to jump in  ;D

He is saying in three to six months but how exactly he estimates that window? What will happen in 3 - 6 months that 'll drive wall street into bitcoin? Anyway lets hope.

I guess that banks are starting to make some resistance ::)