I have decided to list a gold ETF -- Bitcoin Gold Trust -- on the Bitcoin Trading Corp exchange. The symbol will be GOLD. This ETF works just like the Litecoin Gold Trust that I operate on the Litecoin Global exchange, except that shares are denominated in BTC. The two trusts are completely separate entities with their own assets. I would appreciate comments and feedback on this security.
This post is just a summary (despite its length). A copy of the prospectus can be found here:
https://docs.google.com/document/d/18ZVDjRMGSiEWH6TTHmrLhT-z0clZLVP87w4fZMB1ZdU/edit.
TL;DR: This is very similar to GLD on the NYSE.
Highlights:- Shares each represent 1/100th of a troy oz. of gold (initially).
- Shares can be redeemed for physical gold bullion (in 1 oz. units).
- Shares normally trade at the spot price, but can be higher or lower.
- The fund strives to maintain liquidity and price stability (relative to the spot price).
The Bitcoin Gold Trust is an exchange-traded fund listed on the Bitcoin Trading Corp. Exchange. The trust holds physical gold bullion and issues shares representing its holdings. The purpose of the trust is to provide a way in invest in gold through bitcoin without the inconvenience of holding physical gold bullion.
The objective of the trust is for the value of the shares to reflect the price of gold owned by the trust, less the trust’s expenses and liabilities. The trust receives gold in exchange for shares and delivers gold in exchange for redeemed shares. The ability to exchange of gold for shares is what maintains the nominal value of the shares at the value of the gold that they represent. The trust is not actively managed and does not engage in activities designed to profit from changes in the price of gold.
With the exception of cash held to pay expenses and facilitate operations, the fund invests exclusively in physical gold bullion. The gold is unencumbered, fully allocated, and will never be borrowed, lent, or used as collateral. It is stored in a vault at Wells Fargo and is audited periodically. The initial value of a share is 1/100th of a troy oz. of gold, though fees may reduce that value over time (see below). Regardless of the nominal value, shares can trade at a premium or a discount to that value.
The trust does not intend to pay dividends or cash distributions.
The trust issues and redeems "baskets" of shares on a continuous basis (a basket equals the equivalent of 1 troy ounce of gold in shares). A 5% fee is charged for redeeming a basket of shares. The person redeeming the shares is also responsible for paying shipping and insurance costs. Persons may redeem fractions of a basket at the discretion of the sponsor, but the fee may be substantially higher.
The size of the initial offering will be 100 shares, or 1 troy oz. of gold, but the number of shares can grow as more gold is deposited into the trust.
The only ordinary expenses paid by the trust is a fee of 1% per year paid to the sponsor. The fee is paid issuing an appropriate number of additional shares and assigning them to the sponsor, so the amount of gold that a share represents will slowly decrease from the initial 1/100th ounce.
The sponsor currently agrees to waive the fee.The fund allows a person to invest in gold with the following benefits over owning physical gold:
- Increased liquidity. Shares can be traded whenever the exchange is operating.
- Lower fees and overhead. Typically, buying and selling physical gold incurs steep premiums, especially when dealing in small amounts. The fees for trading shares of the trust are extremely low.
- A convenient way to accumulate gold bullion. A person can buy small numbers of shares over time, and then later exchange the shares for physical gold bullion.
- A way to hedge against drops in the value of BTC.
Bid and ask walls will be maintained at approximately +/- 5% of the spot price in order to ensure liquidity. There will always be shares to buy at a reasonable price and shares can always be sold at a reasonable price.
The finances of the trust are listed here and are updated periodically:
https://docs.google.com/spreadsheet/ccc?key=0Am3m7aRNI-JbdHB4RE1fcDktUmdnSDJpZnpVdG0xY2c
