Is there not?  I thought that was the point of SecondMarket, that they had a platform to allow "accredited investors" to exchange shares of private issues among themselves?


Well, I see this:
http://bitcointrust.wpengine.netdna-cdn.com/wp-content/uploads/2014/03/BIT-Fact-Sheet.pdf
Which mentions "Authorized Participants" and says it's modeled after GLD.

They do say here that they'll offer "limited" redemptions, but they also plan to have shares trade OTC.  You have to assume that the people putting together these funds know what they're doing, and there would be clear issues (as you described) with offering unrestricted creation/redemption at the NAV.

Mutual funds trade at the NAV, but they can't be actively traded, and the fund usually has some period of time (7 days?) to liquidate your position and return your capital.  This fund doesn't look like it's targeting a mutual-fund like structure, but I could be wrong.  Mutual fund shares also don't trade on exchanges like BIT describes as its eventual goal.


This has been answered elsewhere in the thread...  when you buy bitcoins directly you have to worry about storage/security.  If you're a large hedge fund, pension fund, etc, this will be cheaper than hiring a security consultant to explain bitcoin to you.  If you buy shares of an E&Y audited fund and the coins get "lost" or "goxed" your investors can't sue you for negligence.  They're audited.  Why do people buy shares of GLD instead of physical gold?  How does one even put physical gold (or bitcoin) in a tax-advantaged retirement account?


Of course, just like with GLD or any other ETF.  Usually the difference between the price and the NAV will be less than the amount that can safely be arbitraged.  I don't know about you, but I don't have a way to actually buy gold at the published spot price.  There's a premium in walking into my local gold dealer, and I generally would have to sell at a discount.  GLD is, for me, more liquid than physical gold.  All ETFs occasionally have some small premium/discount to the NAV.  It's like the bid/ask.  Most things don't have singular well-defined prices.  There's usually a difference between coinbase/bitstamp/btce too.  I use coinbase largely because I trust them, and I'm probably not going to sign up for btce just for a 50% chance of saving a half a percent.  I'm a long-term investor not a trader.  If I was an active trader, I also wouldn't care about the premium, since I'm just trying to catch the trend not trying to redeem.

An ETF will be about as likely to trade at a discount as a premium.  Some traders have trading strategies based on the size of the premium/discount of certain issues.

If you bought shares of the ETF GLD or SPY on the open market, you can't just make a request to get shipment of physical gold or get your cash back out of the ETF.  There are specific kinds of dealers ("authorized participants") who transact with those running the ETF.  Usually shares are only issued/redeemed in blocks of 50,000.  When an authorized participant buys something like SPY, they actually buy 50,000 shares of the ETF (to be sold on the open market) in exchange for 50,000x500 shares of a basket of 500 securities (bought on the open market).

So, what you're saying is sort-of true, but not exactly...  only AP's can transact with the fund itself, and these AP's most likely exchange BIT shares for actual bitcoin, not cash.  The AP's will arbitrage price differences between the NAV and the open market, but they are not forced sellers in a way you suggest here.  The fund can't be driven to zero selling against an illiquid market just because of a desire for redemptions at the NAV.  Retail investors must buy/sell from willing traders on the market for the ETF shares, and redemptions only happen as an arbitrage activity when liquidity is sufficient for the redemption to be profitable.

I didn't read the whole thing... it's long and repetitive... but... of what I did read:

He's comparing bitcoin fees to ACH and debit card fees.  ACH takes about four days.  Debit cards aren't the same as credit cards, and usually aren't accepted internationally.  Would you use amazon (or overstock.com) if it only permitted ACH and debit cards?  I've paid amazon bills with foreign credit cards.

Coinbase charges 1%, but waives the fee for merchants converting bitcoin to cash below a million dollars.  Credit cards charge around 3%.  He's wrong about mtgox being the largest bitcoin exchange (maybe 3rd, or fourth if you include coinbase) and I'd avoid using them.  Regardless, he's also wrong about them charging a 3% fee, the fee is 0.6% (additional discounts for volume, bitstamp is cheaper).  Yes it's not completely free, and there's also a spread, but fees and the spread will probably come down as the legal risks involved in running a bitcoin exchange are clarified, and as the price reaches a more stable level.

He claims his Chinese/Indian coworkers wired money home for free.  He miss-understood them.  They didn't.  I lived in Asia for a long time, and sent money back and forth having plenty of access to legitimate bank accounts on both sides.  Wire transfers still cost a lot of money today.  People who say otherwise, just haven't actually tried banking internationally.  I've lost close to a hundred dollars when transferring a few thousand dollars from a Singapore bank account to a US bank account.  Even if you have the same bank in both countries, they still charge you the same fees.  Banks claiming to be "global," honestly just aren't.  In the few cases where you can find some way to transfer money without a "fee," there will be a really bad exchange rate that costs you the equivalent of the fee.  It's still a fee, they just hide it.

I have spent $25 to perform a wire transfer from inside China to buy something from a Chinese company that couldn't accept credit cards.  With this particular company, it was their *only* payment mechanism; all of their customers bought this way.

He seems to think that people who don't have access to banking don't have access to computers or smart phones.  I've met plenty of people in Asia who lived in homes with dirt-floors and leaky roofs, who don't have jobs, who struggled, but who have smart-phones (sometimes shared with family members) and access to computers (often via internet cafe's).  Bitcoins can even be printed out on physical paper.

I was personally able to send a small amount of money to my parents more easily (inside the US) with bitcoin than using any other mechanism.  I had bitcoin, so on my end the transfer was immediate, and she was able to convert the coin into cash in her bank account via ACH in four days.  Western Union via ACH would have cost $5 and taken 6 days.  Western Union via cc would have taken 3 days but cost $15.  That's just local, in a single country.  International remittances are a significant % of the GDP of some countries like the Philippines.

It acts as a digital bearer-instrument.  It's like a digital-gold, a commodity that has a market price, that can be transferred over the internet peer-to-peer. There are cost savings to be had when using bitcoin as a currency, but that's not the only value of bitcoin... but there are many use cases for this sort of technology.

When Cyprus seized the bank accounts of its residents, the price of bitcoin went up, because people just needed some sort of store of value outside the traditional bank.  My understanding is that much of the actual buying pressure came from Spain, where residents feared they could be subject to a similar fate.  Sure these people could exchange their cash for gold, but there might not be enough supply of gold physically in the country at a given moment to bear the demand without having a significant local price discrepancy.  Bitcoin can easily flow into the country.  "Store of value" is a huge market.  The industrial use of gold is trivial, the $6.5T market cap of "all the gold in the world" is almost entirely for purposes of store of value or speculation, without even being (easily) usable as a mechanism for exchange.

Eventually, when we have derivatives markets and the price of bitcoin stabilizes, we'll start seeing the emergence of electronic contracts embedded in block chains.  Banks charge a lot of money to both buyers and sellers when, for example, shipping goods internationally, to ensure payment happens when and only when some physical signature from a shipping/insurance/etc agency comes through.  A block chain contract could ensure that on (and only on) digital signature of release of goods, funds get released.  Shares of a company could be represented on the blockchain, and traded peer-to-peer subject to restrictions encoded in the chain.  We're only looking at the tip of the iceberg of possibilities with bitcoin and related crypto currencies.  Ethercoin will have a whole programming language built into it.

When looking at his government arguments, just replace bitcoin with gold.  If I sold drugs for gold, and then sold the gold to a gold broker, and the gold broker sold the gold to you, can your gold now be seized?  Doesn't that sound absurd?  If the gold broker kept a ledger of every transaction made and with whom it was made, would that enable any current government under their current laws to seize your gold?  Does that actually make some legal difference?  I'm not a lawyer, but I highly doubt it would have an impact on you.  Shrem was arrested, but he was serving as the broker, not the guy showing up at the shop trying to acquire some digital-gold.  Is a gold dealer ever expected to file an SAR in the US?  If so, then I'd expect the same legal treatment of bitcoin broker/dealers (at least until regulations are clarified and we have some kind of precedent established).  If not, then maybe Shrem will get off.  Innocent until proven guilty right?