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Author Topic: What is an ETF and How will a Bitcoin one Work?  (Read 465 times)
Payment21
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March 01, 2017, 02:42:36 AM
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The one event that is going to impact the bitcoin price in the next ten days is the approval or not of a bitcoin Exchange Traded Fund (ETF) in the US. It is an application that the Winklevoss brothers made.
    
Many believe that if they get the go ahead, that will open up bitcoin to mainstream investors, make it more legitimate and thus drive the price further up.

But…

1.    What is an ETF?

2.   How is it different from a mutual or an index fund?

3.   If there is an approval, how will a Bitcoin one work?

Let’s share the knowledge.
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March 01, 2017, 04:25:44 AM
 #2

its an investment vehicle... you can think of it as a mutual fund for most intents and purposes.
There are some subtle differences that you can read about on investopedia.  One key
feature , as the name suggests, is exchange based trading (in this case NASDAQ) which
will allow day trading and thus larger volume. 

The application has been revised many times,  reportedly because of the security risks.   

Most gold ETFs, for example, have rules about taking actual delivery of the gold.  Normally that requires a huge
position.   No doubt there similar considerations for the Winkelvei... how will they
be securing the bitcoins and transferring them to those who qualify for delivery.

If the ETF is approved, it will be very good for Bitcoin investors as it will be
a milestone as mainstream investors begin to allocate some of their assets
into cryptocurrencies.


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March 01, 2017, 05:59:25 AM
 #3

its an investment vehicle... you can think of it as a mutual fund for most intents and purposes.
There are some subtle differences that you can read about on investopedia.  One key
feature , as the name suggests, is exchange based trading (in this case NASDAQ) which
will allow day trading and thus larger volume. 

The application has been revised many times,  reportedly because of the security risks.   

Most gold ETFs, for example, have rules about taking actual delivery of the gold.  Normally that requires a huge
position.   No doubt there similar considerations for the Winkelvei... how will they
be securing the bitcoins and transferring them to those who qualify for delivery.

If the ETF is approved, it will be very good for Bitcoin investors as it will be
a milestone as mainstream investors begin to allocate some of their assets
into cryptocurrencies.



The question is, will they actually be taking delivery of actual bitcoins, or would the fund manage the bitcoins on their behalf. You never take possession of physical gold with Gold ETF's, so why would investors in Bitcoin ETF's do that? I think the Winklevoss brothers will design it in a way, where investors will have a hassle-free entry into Bitcoin and they will secure the bitcoins in cold storage for these investors and manage the flow of these bitcoins on the NASDAQ.

This will be how I would do it. ^smile^

jonald_fyookball
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March 01, 2017, 05:06:00 PM
 #4

its an investment vehicle... you can think of it as a mutual fund for most intents and purposes.
There are some subtle differences that you can read about on investopedia.  One key
feature , as the name suggests, is exchange based trading (in this case NASDAQ) which
will allow day trading and thus larger volume. 

The application has been revised many times,  reportedly because of the security risks.   

Most gold ETFs, for example, have rules about taking actual delivery of the gold.  Normally that requires a huge
position.   No doubt there similar considerations for the Winkelvei... how will they
be securing the bitcoins and transferring them to those who qualify for delivery.

If the ETF is approved, it will be very good for Bitcoin investors as it will be
a milestone as mainstream investors begin to allocate some of their assets
into cryptocurrencies.



The question is, will they actually be taking delivery of actual bitcoins, or would the fund manage the bitcoins on their behalf. You never take possession of physical gold with Gold ETF's, so why would investors in Bitcoin ETF's do that? I think the Winklevoss brothers will design it in a way, where investors will have a hassle-free entry into Bitcoin and they will secure the bitcoins in cold storage for these investors and manage the flow of these bitcoins on the NASDAQ.

This will be how I would do it. ^smile^

I am not an expert but I think delivery has to be an option for high net worth investors (as it is for Gold) ; otherwise they are just basically operating as a CFD.
But you are right , most investors don't want the hassle -- that is why they will like the ETF.



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March 01, 2017, 05:13:15 PM
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its an investment vehicle... you can think of it as a mutual fund for most intents and purposes.
There are some subtle differences that you can read about on investopedia.  One key
feature , as the name suggests, is exchange based trading (in this case NASDAQ) which
will allow day trading and thus larger volume.  

The application has been revised many times,  reportedly because of the security risks.  

Most gold ETFs, for example, have rules about taking actual delivery of the gold.  Normally that requires a huge
position.   No doubt there similar considerations for the Winkelvei... how will they
be securing the bitcoins and transferring them to those who qualify for delivery.

If the ETF is approved, it will be very good for Bitcoin investors as it will be
a milestone as mainstream investors begin to allocate some of their assets
into cryptocurrencies.



i can't really grasp the difference between this EFT that have this big hype and a normal exchange that we already have like coinbase? what are the correct difference between the two, i can't rally understand

jonald_fyookball
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March 01, 2017, 05:33:15 PM
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its an investment vehicle... you can think of it as a mutual fund for most intents and purposes.
There are some subtle differences that you can read about on investopedia.  One key
feature , as the name suggests, is exchange based trading (in this case NASDAQ) which
will allow day trading and thus larger volume.  

The application has been revised many times,  reportedly because of the security risks.  

Most gold ETFs, for example, have rules about taking actual delivery of the gold.  Normally that requires a huge
position.   No doubt there similar considerations for the Winkelvei... how will they
be securing the bitcoins and transferring them to those who qualify for delivery.

If the ETF is approved, it will be very good for Bitcoin investors as it will be
a milestone as mainstream investors begin to allocate some of their assets
into cryptocurrencies.



i can't really grasp the difference between this EFT that have this big hype and a normal exchange that we already have like coinbase? what are the correct difference between the two, i can't rally understand

I think it is mostly perception.  We're talking about mainstream adoption.  Investors feel secure and that this is legitimate when there is a bonafide ETF being traded on NASDAQ versus "yeah there's this website you can send money to".


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