Bitcoin Forum

Hey guys it's Jason and in this video I'm talking about the recent news of the winklevoss bitcoin trust and their plans for being added on the Nasdaq OMX with an IPO. Go check it out :)
Video Link: http://youtu.be/KvUrEVu4vB4 (http://youtu.be/KvUrEVu4vB4)

you changed the background  :o  ! WHY  :P ?

to add onto the video

a basket is 50,000 shares
a basket is also 10,000btc

meaning 5 shares=1btc

https://www.sec.gov/Archives/edgar/data/1579346/000119312514190365/d721187ds1a.htm

meaning initial full bitcoin price of winkles own stash is $104.50 per BTC

and yes these 200k bitcoins (1mill shares) are winkles own 200k stash of coins
so if your lucky enough to get the winkle stash.. your gonna do great later when the price settles.

i initially thought that this 1mill shares would be it, the limit. but i was corrected recently (by deathandtaxes) that once winkles own stash is bought up then private companies can add baskets of their own stash to the trust which, if bitcoin is obtained from exchanges and other sources) take out bitcoin for normal circulation and due to it being 10k lumps, would cause a large bitcoin price rise.

I would argue that this is a very big step in the right direction to get bitcoin to start trading as an ETF. I would say that ETF trading would likely push up the price over the long term.

It should also be noted that second market recently announced an open ended mutual fund that will invest in bitcoin

In concept, great.  In practice, a disaster.  What happens when someone hacks the Winklevoss and steals all the BTC?  Are they going to guarantee the principal?

The fact transactions can't be reverses make any BTC investment pool, where a large group of investors share a common wallet, EXTREMELY risky.  See Gox.

The Bitcoin protocol already allows multisig transactions. Why not take advantage of that?
On another note... I'd like to get my hands on a couple of them shares when they come out :D.

1) winklevoss are going to be licenced.. this means liability insurance. = good for people
2) the baskets are 100% cold stored. hackers wont get any coins. privkeys are locked in secured and insured storage boxes physically away from the internet. only public keys will be shown on the internet.
3) the only time a privkey is touched is if a whale wants to buy a whole basket (cash out) from winklevoss trust. otherwise (see 4)
4) the only thing that is internet based is the shares. and the security will be proper banking/military grade, not basement dwelling PHP grade
5) if you think that winklevoss will be hacked then expect apple and nasdaq to be hacked... same thing

Eventually people will want to move in and out of the ETF via exchanging bitcoin for shares which will eventually force the ETF to maintain somewhat of a hot wallet.

Yes I did lol, I moved it to the room with my miners :P what's your take on my new set? Better or worse?

I also love the discussion we are having. It is interesting to hear that other investors can add baskets :)

you cant pay bitcoins to the nasdaq! only fiat

the purpose of the EFT is to buy shares that represent 0.2btc. this is for FIAT investors to get some expereince of the bitcoin price volatility with their FIAT.

the only bitcoins entering the ETF are in basket amounts by firms that want to be fund managers annd offer shares to their clients. that are deposited to QR codes of a public key. the private key is cold stored in safety deposit boxes. there will never be a hot wallet.

by bing in the ETF trust the bitcoins are locked in and covered by the ETF's liability insurance

if the certified traders(fund managers) want to get back their bitcoins, it would be done via proper contractual communications. and the withdrawal limit is in baskets (10,000btc) in no way can someone just take out 1or 2 bitcoins. as that spoils a whole basket. again only baskets of bitcoins can be added or removed to and from the ETF.

so do not expect hotwallets and small bitcoin amounts going in and out. it all would be done behind the scenes with proper contracts and communications to legitimise the transactions.

this is not going to be a php basement dweller exchange website... we are talking NASDAQ!

and by the way swapping a real bitcoin for a share is stupid, as the share price would be slightly lower then the actual bitcoin (ETF commisions and insurance costs would dilute the price slightly meaning a $600 bitcoin would have probably a $110 share price($550/equivalence to a btc). and when cashing out you may get less then $550 after fee's, so stick with real bitcoins if you have them. and use FIAT to buy shares, atleast they will be insured if ETF gos bankrupt)

i go with franky1  :)


but:

i would not say that hacking and losing some btc is impossible here:

http://www.marketwatch.com/story/nasdaq-others-hacked-in-multimillion-dollar-fraud-2013-07-25

http://www.forbes.com/sites/christophersteiner/2012/08/30/how-the-nasdaq-got-hacked/


@ThePanCakeKid95

background is fine  ;)

agreed, never said impossible to hack, but requires higher level of skill then the current script kiddies running brute force scripts on a php/sql login..

by that i mean hacking the ETF. again no hotwallet means no coins disappearing. the most they can do is edit the names and addresses of share holders and move shares to their own share accounts...

bitcoins are not traded with clients on the ETF LIVE platform. the bitcoins are separate (buying and selling baskets) are done behind the scenes, not live traded... again SHARES and fiat are the live trade platform.. not bitcoins..

the baskets of bitcoins are 100% cold stored.. hope that clarifies things

the ETF will not be low security like some of these exchanges. and as i said the funds will be insured.

franky, s/EFT/ETF/g , please :)

Exchange Traded Fund
Electronic Funds Transfer

This could be huge for bitcoin. I wonder how much of this is already priced into the market at this point. Maybe it's not really priced in yet since it's not clear how popular this will be.

Either way, to me this is one of the most exciting things to happen to BTC in a very long time.

I think it's not priced in, because it will generate new inflow of capital. Significant amounts...

Although I'm not that excited, because it seems to be a little bit backwards-oriented: Investing in a new monetary concept using an investment vehicle that is effectively invalidated by the new monetary concept.

When will it launch?

ya.ya.yo!

Yeah, in a way it does defeat the overall purpose of bitcoin. But a lot of people and groups can not invest in bitcoin and have to invest in securities. So this is just the market figuring out a way to offer them a chance at the value that bitcoin provides.

It almost sounds too good to be true. Maybe I'm overestimating the potential.

are you sure about that? i mean why would they sell their BTC's so cheap compared to current price

$20.90 per share, 5 shares 'represent' 1btc

thats why

or havnt you read this:
https://www.sec.gov/Archives/edgar/data/1579346/000119312514190365/d721187ds1a.htm

or watched this
http://youtu.be/KvUrEVu4vB4

they're not selling their actual BTC for $104.50, they're selling 5 shares which represent one of their bitcoin..

the bitcoin still remains within the trust. but after the initial share sell off of cheap shares. the winkles are going to make alot of money through their trading commisions and service costs.

imagine if you could sell your own 1bitcoin to 500+ people in a year without it ever leaving your private key that you hold.. selling the shares representing bitcoins gets them nice commission/spot fee's.. even if 1%, 500 buys and sells in a year is 500%

and thanks for the keen eye waxwing
edited to be correct now. and excuse the pun but when it comes to the winklevi, im always getting the names mixed up

Bold my emphasis. https://www.sec.gov/Archives/edgar/data/1579346/000119312514190365/d721187ds1a.htm (https://www.sec.gov/Archives/edgar/data/1579346/000119312514190365/d721187ds1a.htm)

I would suggest the maker of this video first read the fine print before embarrassing himself on YouTube. The 20.09 USD price has nothing to do with the price the units of this trust will be offered to the public.

That is not how it works. Only "Authorized Participants" can redeem their shares for the bitcoins, and then it has to be done in basket-size amounts. People that want to move in and ouf the ETF simply buy and sell shares on the exchange.

The basket size is only implemented to keep costs down. If a large enough of a holder of either bitcoin or "COIN" wanted to trade one for the other and had a "basket size" holding then they could either work is an authorized participant or work to become one.

Will this to trade soon, will this trust forced to buy more bitcoin if there are great interest?

Hopefully yeah. I hope it's so popular that they are rushing out to purchase more.

i guess their "little" bitcoin stack will be enough for the first 4-6 months but they have to get more  :D

4-6 months??

even if shares start at $130 a piece (equivlent to $650 bitcoin value)... its only $130mill cap... did you see how fast the caps of other IPO's reached over $130m..

i can see them shares being bought up in days. especially if offered cheaper than 20% of bitcoin true value

Yup I would not be surprised if they are already pre-sold.  This has been coming for over a year now

What would happen if they sold out or something quicker than expected? Would they have to freeze the ticker symbol on the market until they went out and acquired more bitcoin? I wonder if they have a plan for this(would be a good problem to have I guess :P)

imagine it this way, winklevoss sell 1million shares for.. $130 each. to group A.. once those share are gone group A (early adoptors) decide to sell for profit as there is still demand.

its just like bitcoin exchanges or any other exchange if you buy a share/coin/fiat, and someone else demands it, you can sell it on and because of the demand, charge a higher price. shares wil be flying back and forth btween many peoples hands if demand is high enough, causing a winkledex price to rise..

but if the "authorised parties" add a basket to the trust, this will add fresh shares, meaning more supply and would slow down the demand.

there would never be a situation where they would freeze the ticker.. those holding the shares would just have sell prices higher and let buys if demanding enough get the shares. its how exchanges function.. check any bitcoin exchange and swap the word bitcoin for winkleshare, and you will see how it works

thats why you see a list of sell order and buy orders on exchanges. after being sold. they dont just disappear, they are always changing hands

No the price of the ETF would trade higher then the underlying amount of bitcoin held. As a result the APs would have an incentive to purchase more bitcoin on exchanges, convert the bitcoin to shares of COIN and sell the ETF in the market, causing the spread between BTC and COIN to decrease; this process would be repeated until the spread would not be worth the risk for the AP

But in that case couldn't they lose money if the market adjusts the price upwards before they finish buying all the btc they need? If COIN is trading at 20% above spot you can almost guarantee that Bitstamp et al are sure to follow soon.

3 scenario's
1) as quote above says selling higher to incentivize fun managers ("authorized participants") to buy more baskets
2) price mirrors bitcoin average price/5 because shares are backed by bitcoin no one would pay alot more
3) prices are below once you take into account fee's

i think that share prices will be close to a 5th of a btc (5shares=btc equivelent remember). and fund managers ("authorised participants") dont care* if bitcoin goes to $5000 or $50. because they are getting a set commission per trade.

much like how btc-e, bitstamp, etc dont care as they are making 0.2% for from the buyer and the seller. so these fund managers controlling their basket of 50,000 shares could make alot of money just buy having a basket that kept swapping between clients hands.. without any hard work at all.

for instance.. take bitcoin exchanges.. if btc-e have a trade volume of 10,000 coins a day they make 0.4% per trade (0.2 buyer 0.2 from seller). just by having the 10,000 fly through different peoples hands btc-e makes 40btc profit per day.

the basket managers if their 50,000 shares were to change hands per day, they are making alot of money doing nothing but sitting there watching the screen fill up with transaction fee's. if the fe was 1%, they can simply buy another basket in 100 days without even lifting a finger.

and if the share price sticks to roughly bitcoin price, then the managers get a known daily income. yes we will se spikes that will incentivize managers to buy more coins to add more baskets, which would raise true bitcoins up to mirror the winkledex again

*well they do care because 1% of $5000 is better then 1% of $50.. but thats another level im not above the point im making

Over the long run the price of COIN will mirror the price of BTC/5, if it deviates too much then the APs will step in and perform an arbitrage trade. If it deviates a little bit then traders on exchanges will see the difference, anticipate trades from APs and buy/sell on the exchange in order to close the gap.

Over the loan run an ETF should improve liquidity in the bitcoin market.

yea that's the goal

This would be very likely indeed. But the APs would not need to purchase all of the BTC that they will give to the trustees below the selling price, they only need their average price to be below the price of COIN.

I have read that the basket size is 50,000 (I am not sure if this is shares or BTC, but I think BTC) so an AP will need to buy 50k BTC to give to the trusee so they can sell 250k shares on the market.

Wow with at least a couple of these ETF's being planned this could really drive demand. Definitely time to buy and "hodl."

not just drive demand, but allow things like hedge funds, which at the current moment can't invest in bitcoin, with this it will open up bitcoin trading to big time traders who wish not to understand bitcoin and wish only to invest :)

bitstamp doesnt move the bitcoin price.. buys and sellers (users of bitstamp) move it...
what you will see those is the authorised participants being the bitstamp users and buying bitcoins as fast as they can. so yes bitcoin price on bitstamp will rise due to AP's buying the coin.. not bitstamp tweaking order values behind the scenes to mirror other exchange values, as that's illegal.


its 10k coins = 50k shares per basket

i think on day 1 of launch it would be AP's buying the winkles 20 baskets. and the winkles use that money to buy more bitcoins on bitstamp etc.. to add more baskets and then slowly over a few days if AP's see demand is high still, the AP's would also buy bitcoins and form their own 10k btc baskets in the trust, to add to the ones that were pre-made by the winkles... but thats just me speculating

i do se though that buying 10k coins in one lump will make the bitcoin price of an exchange rise, if you look at the market volume of sell orders and see what price it lands on once you take 10k coins off the sell order wall.

There is nothing that prevents hedge funds from investing in bitcoins. Google "bitcoin hedge funds".



It could also be the other way around. APs that bought thousands of bitcoins last year exchange them for shares and then dump the shares, driving the price down.

Get a lapel mic

Maybe it depends where you are or what rules you're adhering to.

This guy says he would buy only if there was a proper exchange.

http://www.investmentweek.co.uk/investment-week/news/2310184/hendry-i-would-buy-bitcoin-if-i-could

Do you have a link to that?

https://www.secondmarket.com/company/bitcoin-investment-trust

It's value is calculated every day at 4 PM eastern time, and charged a 1.5% fee to buy and 2.0% annual fee. You need to invest a minimum of $25,000

what i hate about the winkle twins and secondmarket.. is the lack of responsibility they will have if disaster strikes.

in both cases the entities winkle twins... second market.. both have set up a trustee company, who then "SPONSERS" a third company..

thus still controlling it physically, but having 3 lines of defense to run away from legally..

bring back the good old days where people not "companies" were made bankrupt if their business went south.. the days where the captain goes down with his ship.. instead of these bull crap regulations that allow the captains to sail away with all the passengers possessions. leaving passengers to drown..

apart from that rant..  lets hope that never happens

Funny you should say that, I actually have one just havn't used it the last few videos for some reason :P

Bitcoin market price would almost never go down in any significant manner if an ETF is launched dealing with bitcoin

Was hoping for a more professional listing like WNKY

It'll definitely be interesting to see how this plays out.  We can hope that there's a significant amount of interest in bitcoin from people like Hendry who end up buying this ETF.

that would sound hilarious on financial news, "WNKY's up again this morning ! 200%!"

My prediction, this will fail within 5 years.

- Hey Chuck, why are you so moody this morning?
- Well Bob, WNKY's today and I was hoping to show the misses a good time tonight.

lets say i was trading something valuable, a new asset.. lets call it milkium... where lots of different people can trade it too..

would i want to be known on nasdaq ask just frnk... or will i want to try and make it so that i am the main name everyone goes to for trades relating to milkium. by owning the abreviation MLKM...

the winkles didnt just want to be another business, they wanted to potentially be THE market of bitcoin shares, hence choosing coin.. making them appear to be the one and only business trading coins

What an insightful comment. Back up your prediction with your reasoning behind, else this is nothing but FUD trolling.

Why 5 years?  Likelihood is that if it survives 6 months, it will survive indefinitely

yea, like I've said before I think this will help the average investor and larger investing funds let people get into bitcoin :)

My prediction, it will last for 311,000 years.

You heard it here first. Invest accordingly.

lol :P

any updates on the etf? it's the only thing that can save bitcoin from the current downward spiral disaster right now

actually yes I just posted a video to my channel, It talks about the latest news