Too bad the discussion veered off on a rather boring tangent in a very emotional way after the above 2 posts.
I think it's a very valid discussion and I'm thinking about this myself a lot: loads of people will buy the silbert or later maybe the winklevii shares and they will brag to their friends how they own bitcoin now. At first it will probably work out and they will participate in BTC appreciation through the shares they own.
coinits is right, though: you don't own bitcoins if you own such an ETF. Afaik there isn't even a way described to take delivery unless you are a primary dealer or whatever. It's easily imaginable that the trading volume of such vehicles might greatly exceed the volume on the 'real markets' and then we'll have a 'tail wags the dog' situation.
shields answer is promising at first sight: bitcoin isn't gold. It's easy to transact and store, so it's going to be easier for bitcoin to stand up to the ETFs.
I fear the answer is a bit weak, though: the primary use case of bitcoin currently is speculation. This use case is covered by he ETF just fine. I don't see ETF share owners taking delivery on their bitcoins (it's not encouraged or probably even possible, there might even be fine print saying they can be payed out in fiat). In addition: if they were planning to own bitcoins in the first place, why did they buy the shares and not coins, then.
To people who are saying: "but a share is always backed by 0.1 real Bitcoins in custody of the ETF handlers" we can only answer: that's a solution that requires trust in a centralized entity.
I fear these ETFs might turn out to be a slippery slope and might turn out to be misused to control bitcoin price. Hello naked shorting.
Yes: the utility of bitcoin can potentially stand up to such an attack, but only if bitcoin enjoys widespread actual use.
thoughts?
I think you covered the main attractions and pitfalls of the "3rd party fund vehicle"
It is important to understand that this was going to happen whether the "community" desires it, or not. The only matter of importance is its impact, positive, negative, or both.
On the positive side, it makes investment, or at least "exposure by proxy" available to whomever has a brokerage account and a keyboard. Without the technical responsibility of securing the keys. I would wager there is a lot of capital out there without great desire to deposit money with a sf startup or wire funds to hk, people who lack the confidence/knowledge to secure these digital bearer bonds after purchase. This is a potential opening of pent up and untapped demand. More liquidity in theory should diminish day to day volatility, which is something bitcoin needs to get more mainstream use.
Another half-positive, it could reduce the amount of on-chain transaction volume for speculation. Leaving more block space for non-speculative uses.
The two main negatives I see are the possibility of naked short selling with nefarious motives, and potential failure of funds themselves to adequately protect the assets and account for them correctly.
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