Buy bitcoins on Nasdaq

[DeathAndTaxes]

This article posted today, said that their initial investment was $11M but it is worth around "Oops, that’s about $8-million now." today.

So, at $8,000,000 by today's price (~$86 at time of article) we are looking at under 100,000 BTC.

I believe that article is misquoting another article to a flawed conclusion.  In an interview the twins made a reference to purchasing there coins in the summer of 2012 and owned 1% of all Bitcoins.  I assume that meant 1% of coins minted to date (~11M) not all 21M coins but either way if the bought in summer of 2012 neither sum required an investment of $11M USD.  I don't believe they have ever indicated their actual purchase price but the exchange rate in Summer of 2012 ranged from ~$5 to ~$10 per BTC.

The author mixes up the value of an investment and the amount invested. At the time of the New York Times article, their holdings were reportedly WORTH $11M (110K BTC @ $100 ea?).    If we assume they didn't increase or liquidate their holdings it is worth less today then at the peak but it would still be up 800% or so in roughly a year.  I would say that is "not too bad".

Still the S-1 simply indicates the trust will have 200K BTC, issue 1 million shares (0.2 BTC initial NAV), and pre-IPO shares will be issued in baskets of 50,000 shares (10,000 BTC).  It is unclear what will fund the initial share sales.  The W twins might be using their 110,000 BTC, they might have more bought for this purpose, or they may be looking solely for outside capital to acquire BTC.  We may never know unless they decide to tell us.

[DeathAndTaxes]

As an NYSE trader, I would definitely be buying some shares of the ETF.  For some reason I just don't think it will get approved.

I fear you may be right.  Now I think a Bitcoin (or some future CC) ETF is an inevitability but I don't know if it will be this ETF at this time.  While structurally it is very similar to any physical commodity ETF the concept of a "virtual asset" is a huge jump for regulators (who generally are non-creative old men).

It may take a decade of failed attempts before one gets approved.  Then again lets hope they have friends in the right places.   I know if I (as a wallstreet outsider) tried to launch a fund like this the chance of approval would be 0.0%. 

[Damnsammit]

Why I don't think it will be approved...

From the S-1:

Risk Factors Related to the Regulation of the Trust and the Shares

The tax rules applicable to the Shares and the underlying Bitcoins held by the Trust are complex, and no statutory, judicial, or administrative authority directly addresses the characterization of an investment in Bitcoins. The tax consequences to an investor of an investment in the Shares could differ from the investor’s expectations. US Shareholders should refer to the section “United States Federal Income Tax Consequences” for more information.

Regulatory changes or actions may alter the nature of an investment in the Shares or restrict the use of Bitcoins or the operation of the Bitcoin Network in a manner that adversely affects an investment in the Shares.

Until recently, little or no regulatory attention has been directed toward Bitcoins and the Bitcoin Network by US federal and state governments, foreign governments and self-regulatory agencies. As Bitcoins have grown in popularity and in market size, certain US agencies (e.g., FinCEN) have begun to examine the operations of the Bitcoin Network, Bitcoin users and the Bitcoin Exchange Market. There is a possibility of future regulatory change altering, perhaps to a material extent, the nature of an investment in the Shares or the ability of the Trust to continue to operate.

Currently, neither the SEC nor the CFTC has formally asserted regulatory authority over the Bitcoin Network or Bitcoin trading and ownership. To the extent that Bitcoins are determined to be a security, commodity future or other regulated asset, or to the extent that a US or foreign government or quasi-governmental agency exerts regulatory authority over the Bitcoin Network or Bitcoin trading and ownership, trading or ownership in Bitcoins or the Shares may be adversely affected.

 
The point of BTC is to be unregulated, the point of the SEC is to regulate... although the ETF would be more legit than 95% of the OTC stocks out there, I can't see the SEC  approving an ETF that cannot be regulated.

[romerun]

[wachtwoord]

The point of BTC is to be unregulated, the point of the SEC is to regulate... although the ETF would be more legit than 95% of the OTC stocks out there, I can't see the SEC  approving an ETF that cannot be regulated.

The same can be said for gold.

[DeathAndTaxes]

@DnT

You mentioned that different agencies will likely define Bitcoin in different ways and I agree with you. What do you think the correct definition, or should I say most favorable definition, of Bitcoin is and do you see a way of presenting that definition to different departments (like a letter campaign) to help speed along the correct legal perception of Bitcoin?

Well that is complicated and I don't want to derail this thread.  The issue with FinCEN is that they took the easy way out and as a result created a regulatory mess.   Which of these doesn't fit.

Company trades Bullion for USD or USD for Bullion.   Buyer <---> Company
Company trades EUR for USD or USD for EUR.  Buyer <----> Company
Company trades BTC for USD or USD for BTC.  Buyer <----> Company
Company takes USD (or other monetary value) from Party A and at Party A direction delivers the USD (or other monetary value) to Party B.  Party A----> Company ----> Party B

All these are regulated activities but the first two are NOT money transmitters.  The first is Bullion Dealer and the second is a dealer in foreign exchange.  The lack of MT classification is great for these industries because MT is the most byzantine mess of conflicting state and federal regs.   The last example is a the classic Money Transmitter (think Western Union).  It is important to realize that generally speaking "payments" are not money transmission.  If your employer gives you a paycheck (or ACH) that is not money transmission.  If you use a bank wire to pay a bullion dealer who ships you some gold that is not money transmission.  If you make monthly contributions to your IRA by ACH withdrawal from your checking account to your brokerage account that is not money transmission.

Generally speaking money tranmission involves (not lawyer terms) "moving someone ELSES money".  If your employer uses a payroll company and provides funds and instructions (pay QA $10,000 monthly into this account) the Payroll company is a money transmitter.  If you take $500 cash to Western Union and "send" (although your money never moves) it to your friend in Virginia who picks it up at a WU location that is money transmission.  The $500 isn't WU it is yours, WU is just moving it for you.

Now look at the BTC example above.  I would argue trading/exchanging BTC for USD has more in common with trading/exchanging Gold for USD or trading/exchanging EUR for USD.  FinCEN however couldn't make it "fit" in those classifications.  Bullion dealers specifically name precious metals and Dealers in Foreign currency specifically define "foreign currency".

The only category that could possibly fit, in the sense of round peg and square hole but we have this sledgehammer is Money Transmitter.  Of course that opens up a nightmarish world of bureaucracy at the state level.  Honestly there is no worse classification.  It is cheaper and faster to form a new credit union (or buy an existing failing one) then becomes registered as MT in all states.

So I guess I answered what it shouldn't be.  The reality is no existing MSB laws properly cover what Bitcoin is.  In an optimal world regulators would have gone to congress and asked them to expand the scope of their authority to cover virtual currencies.  FinCEN then could either have expanded the "Dealer in Foreign Currency" category to also cover virtual currencies, "Dealer in Currency" or created an entirely new category (there are 6 classes of MSB, no reason it couldn't be 7).

For the record this is the approach that regulators in Canada have taken.  They indicated that no existing MSB regs cover Bitcoin brokers/traders/exchanges.  This isn't to say they don't see the new for regulation but rather the existing regs don't cover it and new regs will need to be written.

[Damnsammit]

The point of BTC is to be unregulated, the point of the SEC is to regulate... although the ETF would be more legit than 95% of the OTC stocks out there, I can't see the SEC  approving an ETF that cannot be regulated.

The same can be said for gold.

I understand the comparisons of BTC to gold, however, I don't think the SEC is going to see that comparison.

Furthermore, there is a precedent established with the exchange and value of precious metals that goes back long before the US Dollar was thought of... there is no precedent set for virtual coins on the NYSE.  (Edit: DnT explained it much better above )

Unless ummm... Facebook and Zynga credits, but those are only purchased with USD and cannot be withdrawn from the account.

[bitzox]

@DnT

That is a really succinct and easily understandable explanation of the state of regulatory affairs for FinCEN.  I followed the thread where you detailed your letter to them but I think your explanation here does a better job of summing up the situation. Thanks!

[QuestionAuthority]

Thanks. That's kind of depressing. It seems like the USA is just attempting to kill Bitcoin with as little effort as possible. They should at least give us a fighting chance to succeed or fail on the merits of the design.

[Chaoskampf]

I don't like this.

[CurbsideProphet]

The more I think about it, the more I feel this will be shot down as well.  FinCEN et al already sees Bitcoin as a good medium to launder money.  In order for this ETF to work, the regulators need to define Bitcoin as a commodity, not as a currency.  If Bitcoin is defined as a commodity then all the exchanges could argue that they are not MT's and render FinCEN essentially useless.  For obvious reasons I don't think this will be allowed.

However, as previously mentioned I still think some good can come out of all of this whether it succeeds or not as it will force regulators to make a much more transparent definition of just what they classify Bitcoin as.

[Damnsammit]

The USA will define Bitcoin just as soon as it figures out how to define marriage... so next decade? 

[BitTrade]

Title of thread is misleading. 

Also, this seems like it's simply an exit strategy for the winklevii more than anything.

[QuestionAuthority]

Title of thread is misleading.  

Also, this seems like it's simply an exit strategy for the winklevii more than anything.

No, that's what I thought too but DnT made a very good argument against that motivation. Read: If they wanted out they could simply cash out in roughly four months.

[Pompobit]

when their proposal will be accepted or rejected?

[cr1776]

There are no guarantees, but rough estimates would be 4-12 months - yes, it is a wide range and there does not seem to be a FedEx overnight type guarantee.  ;-)

With regard to the comments above, one can hope that the regulators do not coordinate and the SEC defines it as they will.  It is good to remember that very often the left hand does not know what the right hand is doing so it is a possibility.  Or, perhaps the SEC will disagree with FinCEN and interpret things differently. 

One can hope that either there is a turf war here or that the left and right hands do not coordinate.

when their proposal will be accepted or rejected?

[cypherdoc]

too many of you are being way too pessimistic about what the Winklevii are intending.

a couple of times over the last 2 yrs I myself have had discussions with other early adopters about developing an ETF.  not only to profit from management fees but to help drive the price of BTC.

getting an ETF thru the SEC will be a huge windfall for BTC and likely drive the price several orders of magnitude higher as it will open easy BTC investing to the masses in a regulated, accepted way.  IRA's, Keogh's, SEPS, retirement plans, and institutions of all kinds will now be opened up to invest in BTC.  this too was the whole premise of GLD and SLV.

the Winklevii are just doing more of their part to try and help Bitcoin while making a profit doing so.  their ultimate goal is not to sell their stash; it is to drive the value of their stash to the moon.

[klaus]

the Winklevii are just doing more of their part to try and help Bitcoin while making a profit doing so.  their ultimate goal is not to sell their stash; it is to drive the value of their stash to the moon.

+1

[2dogs]

Numerous ETFs are perfect for short positions.

Hopefully, calls/puts will be available also to hedge positions.

Will just have to see what is offered at what prices, then place bets.

[the founder]

I know I am the OP of this thread,  but I never really chimed in.

I want to point out the following in the most related ETF I can think of :  SLV

iShares Silver Trust (ETF)
NYSEARCA: SLV

Here are the general guidelines surrounding it:
Holdings: Physical Silver Bullion 100.00%

The Trust holds silver bullion and is designed to provide investors with a simple and cost-effective method to gain exposure to the price of silver.

http://us.ishares.com/product_info/fund/overview/SLV.htm

---

Substitute the words "silver" for 'bitcoin'  and you now know what this is.

If a billion dollars go into the bitcoin ETF,  making that 1% of all bitcoins worth a billion,  that means the total bitcoin marketcap is 100 billion if the plan is not to buy more bitcoins.   However most of these ETF's are fluid,  if that much money flows into it they need to make each of their shares worth 1/5 of a bitcoin.   They could mean that they will be buying large amounts of Bitcoins on the open market (or dumping them if they price goes down).

there are ways (I didn't quite understand how their filing addresses this)  but most ETF's allow for physical delivery.   I am unsure how they plan on addressing this,  if they plan on addressing it.

Another issue is the total amount of bitcoins they control,  if they do not increase it,  and money keeps pouring in (and they allow for physical deliver as most ETF's do)  then you now will see bitcoins worth 100k each or more.  

Not only are they going to be 'selling their bitcoins' to the investors ,  they will be making money on the transactions for life for 'managing' the fund.

You think mining fees are outrageous,  these guys just made the most powerful ASIC miner in history.    Every single transaction on that fund they will be making a profit from.