While I do agree that an ETF will help with hedging investments in bitcoin, it doesn't make the price more stable which is necessary for widespread adoption and a subsequent increase in the value. People on wallstreet are not going to invest in bitcoin just because it is packaged as an ETF. For them it would be tantamount to investing in penny stocks since the ETF itself doesnt bulster the underlying value of bitcoin and there is no metric for how bitcoin should be valued.
What? There is no metric for how any commodity should be valued. What is the metric for the correct price of gold? Yeah no shit, but its bitcoin. Not gold. Gold is valued by a historical and global consensus. If you go anywhere in the world they will know and accept gold. The same can't be said about bitcoin. There's no reason to invest in bitcoin over gold for a normal investor. For bitcoin to gain the same notoriety that gold has, it has to be used by people first; in the way that gold was primarily used as medium of exchange and not solely a store of value as it is today. To package bitcoin as an ETF is premature because it misses the necessary steps for bitcoin adoption and development. People need to interact with bitcoin in person first not through a trading mechanism. Well I would argue that Bitcoin is accepted more place than gold. Let me know where I can buy a domain name with Gold. Still since you are clinging to the value as a medium of exchange which has nothing to do with proper price (your claim) lets use copper instead. What is the metric for the proper price of copper. Is copper properly priced right now according to your magical pricing metric. If not then how/why are there copper financial instruments. Without knowing what the proper price is nobody would buy it, hence there is absolutely no volume on any copper instruments. Er wait yes there is. |
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I think we are on a long slow sideways trend for a few months.*
(* well actually I don't but now all 3 baseless predictions are covered)
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While I do agree that an ETF will help with hedging investments in bitcoin, it doesn't make the price more stable which is necessary for widespread adoption and a subsequent increase in the value. People on wallstreet are not going to invest in bitcoin just because it is packaged as an ETF. For them it would be tantamount to investing in penny stocks since the ETF itself doesnt bulster the underlying value of bitcoin and there is no metric for how bitcoin should be valued.
What? There is no metric for how any commodity should be valued. What is the metric for the correct price of gold? |
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does anyone know how long it will take the SEC to approve this and have them traded publicly? Is this done fast or does it take weeks/months?
Not weeks. Months if lucky but a year is probably more realistic. Knowing regulators years (as in plural) would be bad but not impossible. There is no standard time a lot depends on if regulators have questions and how quickly those questions are answered to their satisfaction, with Bitcoin and this ETF being a "first of its kind" that could mean a lot of back and forth. Once regulators approve it, they need to find an exchange to list it. The IPO of a major company (think facebook) can take 2-3 years. ETFs are simpler and should be quicker, but anyone thinking "fast" is measured in days or weeks will be disappointed. |
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After all it's effectively stating that the opening price of BTC is $100.45 no?
This could be a sneaky way to cap the price while they buy up more BTC
No. The s-1 indicates the quoted price used was solely for the purpose of paying the registration fee. If approved by regulators and an exchange shares will be priced at the current exchange rate at the time of the IPO. The S-1 doesn't obligate them to any price. They could sell pre-IPO baskets of shares at a price of $18.23 or $23.81 per share if necessary. Baskets will be bought by institutional investors. They aren't going to pay a huge premium to the underlying asset. This isn't unusual, pre IPO generally one doesn't know the exact price the shares will be issued at. That is the purpose of the pre-ipo. Pre-IPO investors deliver a deposit held in an escrow account to cover the likely issuing price. So 50,000 shares * $20 ea = $1M. XYZ Capital wires $1M USD. The actual share price ends up being $18.23. XYZ Capital gets their 50,000 shares plus $88,500 from the deposit is returned. |
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Nice to see reason simply oozing through these forums. You do realize the Winklevii have investments in other Bitcoin businesses, they will not shoot themselves in the foot and compromise their investment.
Take a look at his posting history and then just click ignore. It is nonsensical rants using broken giberish in every thread. |
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And after all that people will not be buying an actual bitcoin (or possessing private keys) just a promise from Winklevi that they hold bitcoin in equal amounts somewhere to back their deposits ... what are the rules on taking delivery of btc? They probably couldn't do that without becoming a "money transmitter" Issuance of new shares and redemption of existing shares is only in baskets of 50,000 shares (10,000 BTC). The process outlined in the S-1 is very similar to physical gold ETFs. To be issued new shares (as opposed to buying shares on market) one needs to deliver 10,000 BTC to the trustee. The trustee will then issue a new basket of 50,000 shares and transfer them to the depositor. To redeem shares the same thing applies, one must have 50,000 shares and can then take delivery of 10,000 BTC. Like in other similar ETFs the overwhelming majority of investors will never make a deposit or redeem shares, and will just trade existing shares on the market. As for MT regs. There are various exemptions for MT regulations including registered broker dealers and deposit institutions. I would imagine the fund would use an exempt entity or become an agent of an existing MT rather than try to become licensed as a MT in all jurisdictions. |
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If this is approved, anyone cares to predict when all this will come to market?
They'll want to as fast as they can without compromising their investment It needs to be approved by regulators and then accepted by exchange underwriters. The process moves at the speed of government with a healthy dose of beucracy and side order of legal teams. We are talking a timeframe in months if not the better part of a year. There isn't much they can do to make it go faster. |
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They aren't issuing "paper Bitcoins" in the sense that they aren't backed by anything. The trust will hold Bitcoins and issue shares to represent those. Each share is worth 0.2 BTC and the trust will hold 0.2 BTC for each share outstanding. The trust can't issue shares to represent more then BTC it actually has. If hypothetically the fund was very popular and the fund wanted to issue more shares they are required to obtain 10K BTC (50K shares) before adding 50K new shares for trading. |
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D&T, You're getting slow.  Yeah I am slipping in my old (forum) age. |
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But if the private keys are the same, doesn't that also mean that they will create the same "universe" of public keys?
What I mean is this: if you create a new wallet it has one address and the private key. When you create new addresses for that wallet all derive from the same private key. If two private keys are identical won't they eventually create the same addresses? (Whether they show in your address book or not (yet))?
There is no such thing as a "universe of private keys". Your wallet contains 1 private key for each public key (and address). There are deterministic wallets which use a seed to produce multiple addresses but the seed isn't the private key. The seed allows one to create multiple private keys (one private key for each address) from a single seed. You likely are (incorrectly) assuming a wallet has only one single private key for all the addresses. If your wallet has 1000 addresses you have 1,000 unique private keys. |
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It will also open up the ability to hedge using shorts against the ETF.
Take a company which needs working capital in BTC but doesn't want to be exposed to losses due to exchange rate decline. The company could open a margin account and short the ETF while holding physical BTC thus being hedge out against the exchange rate.
A person with BTC in cold storage and a brokerage account with sufficient margin could quickly liquidate/trim a BTC position by using a short against the ETF very quickly without keeping BTC on exchange or having to wait for the transfer.
Lastly it would be possible to buy sell options against the ETF. By selling "naked" calls against the ETF and holding physical BTC it would be possible to secure a call revenue stream at the expense of capped upside potential.
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In other words if Alice has a wallet that contains the address xyz and Bob has a wallet that contains the same address xyz
both have the same private key?
(And thus all individual addresses of Alice and Bob can be signed with their own or the other one's private key?)
Well it is slightly more complex. It is possible that Alice and Bob have different private keys which produce the same address because addresses are a hash of the public key. If that happens (essentially 0% chance) either private key can sign a transaction to spend coins sent to the address in question. |
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For the record as far as I can tell this is just a preliminary filling, with numerous omissions, also I do not see anywhere where it states the exchange and definitely does not state nasdaq as the exchange.
Fixed. Not sure where I got that from. |
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Now your 401k can invest in bitcoins, retirement funds, every wall street trader... this is opening floodgates.
It's still for the rich. You're going to need about a million to invest, give or take depending on where the price goes. On the first day of trading, each Share in the initial Baskets was comprised of [0.20] Bitcoins, and each initial Basket was made up of [10,000] Bitcoins. They're only selling them in "baskets" so the minimum purchase is 10,000 BTC. No you are mistaken. The basket is 50,000 shares = 1,000 BTC but the purpose of the basket is merely to fund the IPO (and later allow issuance and redemption of shares). This is a filing for a PUBLIC offering on NASDAQ. If they wanted to have a private offering for high net worth individuals, no registration would be necessary they could operated under a Reg D exemption. If approved and listed on an exchange it would be available to anyone with a brokerage account in any amount even a single share (0.2 BTC worth). Now pre-IPO access will be limited to high net worth individuals and institutional investors but honestly that is the case for just about any IPO. It may help to look at how physical gold trusts, existing financial product which is very similar, work. For a physical gold trust, to issue new shares or redeem existing shares requires a basket of thousands of shares. This is almost never done by anyone other that institutional investors. However any retail investor can use their "normal" brokerage account and TRADE existing shares of the trust (TRADE not ISSUE or REDEEM). One could even trade a single share (although brokerage fees make that uneconomical). The ability to issue or redeem baskets of shares allows the fund to remain balanced. Based on the S-1 this is very very similar structure just replace Gold with Bitcoin. |
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Just thought of this...
This will force the regulators hands in making a decision no?
They will have to define it as some kind of asset at the least.
Good bad or otherwise we will know soon what bitcoin is or isn't
Don't expect regulators to work together, make sense, or even talk. It is entirely possible that SEC will define Bitcoin as a tradeable asset, CFTC define it as a "virtual commodity" and FinCEN still call Bitcoin "monetary value" (and thus subject exchangers to MSB/MT regulations). Meanwhile the states offer tortured illogical notices and guidance due to a lack of basic understanding on what Bitcoin is. Actually I would count on the above happening. Maybe in a decade or so and hundreds of court cases you will see something resembling a logical regulator environment emerge. |
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PPS in it's purest form requires the sending of small amounts. Now, you can argue for various modifications to pure PPS to overcome this particular problem, but fundamentally it kills pure PPS pools. It makes it impossible to get paid for 1 share (quite a bit more than 1 actually, but it's the same issue), so the pool is no longer PPS, but PPsS.
It is impossible to get paid for a difficulty 1 share but shares doesn't have to be difficulty 1. Why couldn't one use a higher difficulty share? Revenue per difficulty 1 share: 25 BTC / 21,335,329.114 * 1E8 = 117 S ea (at current difficulty) Dust Threshold: 5430 S Maximum # of independently payable shares per BTC of block reward: 1E8 / 5430 = 18,416 Min pure PPS share difficulty: (block difficulty) / (18,416 * current block subsidy)Min pure PPS share difficulty (at current difficulty & 25 BTC block): ( 21,335,329.114) / (18,416 * 25 ) = 46 diff. Value of difficulty 46 share = 25 * 46 / 21,335,329.114 * 1E8 = 5390 S ea At difficulty 47 a 1 GH/s miner will find ~ 17 shares per hour (average time between share 201 seconds) For simplicity I would round to nearest 10 difficulty and change every difficulty adjustment. Too easy. The last 8 difficulty periods would be Period Share diff Value per share
------------------------------------------------
04/05/2013 20 diff 6516 S
04/17/2013 20 diff 5571 S
04/29/2013 30 diff 4962 S
05/12/2013 30 diff 4469 S
05/25/2013 30 diff 4114 S
06/05/2013 40 diff 3203 S
06/16/2013 50 diff 2585 S
06/29/2013 50 diff 2343 S
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How is it that they estimate such negative mining profits? Or am I just reading that wrong?
The chart assumes the network requires 650W per GH/s. While that may be roughly true for GPUs it vastly overstates the cost of ASICs and thus during this transition that chart is next to useless. Modeling the mining cost of GPU is pretty easy. Modeling the mining cost of ASICs is pretty easy. The key factor is what % of the network do ASICs make. |
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I suppose if you look at the exchange rate and the total subsidy plus fees earned, you can get a pretty good estimate. Theoretically the total mining cost should be slightly lower than the total mining revenue. That should provide the information needed to calculate the missing variable, right?
In equilibrium yes. That is what I attempted to estimate in updated post above. However right now the network is obviously out of equilibrium for a couple of reasons a) many miners scaled back on GPUs and FPGAs in anticipation of explosive difficulty growth due to ASICs b) ASIC supply is constrained. Simple version is ASICs are highly disruptive and until their rollout is "complete" the network won't be in equilibrium. ROI% on ASICs deployed today are off the charts obviously if possible people would deploy significantly more hashing hardware however deployed hardware is constrained not be economics but lack of availability. By "complete" I mean a point where there is such availability of ASICs that the only reason more hardware isn't deployed is due to economics (i.e. miners stop buying more ASICs because it doesn't make economical sense to do so). ~3.5PH/s is a ballpark guesstimate when the network is in equilibrium given: * current exchange rate (~$100 USD : 1 BTC) * miners deploy new hardware up to a 100% annual ROI% * high availability of ASICs at ~$25,000 per TH/s hardware costs and $9,000 per TH/s annual electrical costs. * there is no development of significantly superior ASICs (say magnitude better in terms of MH/$ and MH/W). 3,500 TH/s @ $9,000 per TH/s in annual electrical cost would put annual energy requirements at ~$30M (very loose guesstimate). |
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Has anybody ever done any power calculations for the entire network? Like estimating the current global hash rate and then using an average of power consumption per hash? I think it might be interesting to know that and see the efficiency of the network overtime as mining technology improves.
This page: http://blockchain.info/statsHas some estimates based on assumptions of power consumption of 650 Watts per gigahash and electricity price of 15 cent per kilowatt hour. Feel free to adjust the numbers if you think that it too conservative or aggressive of an estimate. What is difficult to factor right now is how much of the network is ASICs. It is likely the most important factor because ASICs are so much more efficient (<10W per GH/s) compared to GPUs that the overall network efficiency varies significantly depending on how much ASICs contribute to total network hashing power. For example if we assume the average GPU is 650W per GH/s and the average ASIC is 10W per GH/s. Lets convert that to 650 KW per TH/s and 10KW per TH/s respectively. The network is roughly 170TH/s. I am going to assume 10 cent per KWh instead of 15 cents as marginal miners are pushed out first, which should make the average energy cost of the network lower than average global energy cost. $0.10 per kWh = $100,000 per GWh Is the network made up of 100TH/s of GPUs and 70 TH/s of ASICs? 100 * 650KW + 70*10 = 65,700 KW = 575 GWh annually = ~$58 mill USD annual electrical cost Is the network made up of 150TH/s of GPUs and 20 TH/s of ASICs? 150 * 650KW + 20*10 = 97,700 KW = 855 GWh annually = $86 mill USD annual electrical cost Is the network made up of GPUs and 120 TH/s of ASICs? 50 * 650KW + 120*10 = 33,700 KW = 295 GWh annually = $30 mill USD annual electrical cost One thing is certain at current difficulty if ASICs replaced all GPU the annual electrical cost would be ~$2M USD (10 kW per TH/s * 170TH/s * 24 * 365 *$0.10 per kWH) and at $25,000 per TH/s, the deployed capital would only be a mere $5M. Both are much smaller than the value of total mining reward. If ASICs completely replaced GPU and the network hash power remained 170TH/s the annual return on capital deployed is in excess of 2,400% [ ($120M - $2M ) / $5M ]. It doesn't take a rocket scientist to say that reward greatly exceeds risk and as such there will be demand to deploy more hashing power. This means difficulty is going up ... a lot. The only reason difficulty isn't 20x higher is the slow rate of ASIC deployments. People want more hashing power they just can't deploy it fast enough. Lets assume eventually this bottleneck breaks and miners continue to add hashing capacity until they (collectively) feel it is no longer worth the risk. That will be expressed as a return on capital. How much return? Hard to say but it depends on what return miners are willing to accept. Lets assume 100% annual ROI% and exchange rate remains the same. Global Mining Revenue - Electrical Costs = Return on Capital Given: Annual Gross Mining Revenue = $120M Annual hardware cost = $25,000 per TH/s Annual electrical cost = $8,760 per TH/s Then: $120,000,000 - $8,760 * x = $25,000 * x $120,000,000 = $33,760 x x = 3,554 TH/s Yes that is 3.5 PH/s or difficulty ~20x higher than today (difficulty 400M). On edit: fixed error ($87,600 vs $8,760 annual electrical cost per TH/s). |
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