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[Rampion]

LOL, Winkl-evil's on Bloomberg, "Winklevoss Twins Make the Best Case Against Bitcoin", pure genius at work: http://www.bloomberg.com/news/2013-07-02/winklevoss-twins-make-best-case-against-bitcoin-fund.html

TL;DR:

1. "It may be illegal now, or in the future, to acquire, own, hold, sell or use Bitcoins in one or more countries, and ownership of, holding or trading in Shares may also be considered illegal and subject to sanction."

<snip>

2. "As the Sponsor and its management have no history of operating an investment vehicle like the Trust, their experience may be inadequate or unsuitable to manage the Trust."

<snip>

3. "The Trust’s internal systems rely on a Security System that is highly technical, and if such system contains undetected errors, the value of the Shares could be adversely affected."

<snip>

Prospective investors should be more than a bit skeptical about putting coin in the Winklevoss ETF.

[Frozenlock]

Wow so they are selling ALL their coins for a maximum amount of Fiat dollars and some find that its good news..

Sure, they are bulls in denial; grasping every last straw of hope for a news that will make the price rebound.
 

[DeathAndTaxes]

I'm interested to see how they will handle expansion if institutional money moves in and buys out all $20 mill straight away. What is their profit model from all of this?

If the demand drives the price higher than the NAV then the sponsor will deposit an additional basket of 10,000 BTC with the trustee and trustee will issue 50,000 new shares.   The trust has now grown by 10,000 BTC and has 50,000 more shares outstanding so each share still represents 0.2 BTC.

Before:
200,000 BTC in trust
1,000,000 shares outstanding
NAV per share 0.2 BTC (200,000 BTC / 1,00,000 shares)

After
200,000 BTC in trust + 10,000 BTC deposited = 210,000 BTC in trust
1,000,000 shares outstanding + 50,000 newly issued shares = 1,050,000 shares outstanding
NAV per share 0.2 BTC (210,000 shares / 1,050,000 shares)


Those shares can then be sold on the market at the current price (higher than NAV) increasing supply, lowering excess demand and moving the price towards the NAV.Note there is an economic incentive here as the newly issued shares only cost 0.2 BTC each but can be sold for more than 0.2 BTC how much more depends on how much of a demand premium is being offered by buyers.

Of course institutional investors can do the same thing so if the sponsor doesn't act then someone else will and scoop up that risk free arbitrage. The process can also be completed by selling 50,000 shares short (sold at price > NAV), deliver the underlying asset to the trustee, collect 50,000 newly issued shares and cover the short with newly issued shares (buy @ NAV).  The institutional investors picks up the difference as profit.

[Rampion]

I'm interested to see how they will handle expansion if institutional money moves in and buys out all $20 mill straight away. What is their profit model from all of this?

If the demand drives the price higher than the NAV then the sponsor will deposit an additional basked of 10,000 BTC to the trustee and trustee will issue 50,000 new shares.   The trust has now grown by 10,000 BTC and has 50,000 more shares outstanding so each share still represents 0.2 BTC. Those shares can then be sold on the market thus lowering the market price closer to the NAV.  Note there is an economic incentive here as the newly issued shares only cost 0.2 BTC each but can be sold for more than 0.2 BTC.

Of course institutional investors can do the same thing so if the sponsor doesn't act then someone else will and scoop up that risk free arbitrage.  As an alternative when price exceeds the NAV, an institutional investor can sell 50,000 shares short, deliver the underlying asset to the trustee, collect 50,000 newly issued shares and cover their own short with the new shares.

A nice scam.

[DeathAndTaxes]

A nice scam.

How is it a scam?  Nobody is required to pay more than NAV if they do it is because they believe the asset will rise and thus the premium paid is just the cost of getting into a position now rather than waiting.  Slippage happens on exchanges is that a scam?  Price is currently $91.08 and you believe it will fall.  You can sell 100 BTC @ $91.08 but selling 500 BTC will drop the price to $90.98.  You are getting less than if you sell slowly, then again if you feel the price will fall below $90.98 before you can unload all 500 BTC @ $91.08 the premium paid for fast execution is worth it.

It would be like saying selling BTC for x on MtGox and buying it for y on BTC-E when x > y thus collecting a profit of x-y is a "scam".  It is called abritrage.  The fact that new shares can be issued or redeemed is what keeps the price inline with the underling asset.

For future reference ... just because you don't understand something doesn't make it a scam.  Many people call Bitcoin a scam using the same "logic".

[Akka]

I still don't get it. Can someone explain me why anyone would invest in this?

The only reason such a trust makes even the slightest sense is for precious metals as they are hard to store in larger quantities. That's a problem Bitcoin doesn't have.

Why would anyone in his right mind buy these instead of buying Bitcoin directly? Unless people that have no Idea what Bitcoin is of course.


In case the reason to invest in this is obvious: This is a honest question.

[wachtwoord]

For many people acquiring and safely storing Bitcoins is really complex. Isn't that reason enough?

[DeathAndTaxes]

I still don't get it. Can someone explain me why anyone would invest in this?

The only reason such a trust makes even the slightest sense is for precious metals as they are hard to store in larger quantities. That's a problem Bitcoin doesn't have.

Why would anyone in his right mind buy these instead of buying Bitcoin directly? Unless people that have no Idea what Bitcoin is of course.


In case the reason to invest in this is obvious: This is a honest question.

Access.

Many people will never want to go through the hassle of figuring out MtGox, wiring a huge sum of funds to "Magic the Gathering Online Exchange" ( a copy then have never heard of before) on the other side of the globe, wait 3-5 days, oops Japanese holiday all service/support enters a blockhole, oops your account is locked and requires validation, please send an apostled copy of your passport (for the record I have NEVER had to send a copy of my passport to a brokerage in my life).  The vast majority of people are simply NEVER (not today, not even in their lives) going to find someone on localbitcoins, grab $1,000 in cash and go to a starbucks to meet "BitcoinRadier487" and make a trade.  It is a pipedream to think otherwise.  Most people are never going to build a mining rig or join a mining pool, etc.

That isn't to say these are "bad" methods for investing in Bitcoins but they aren't for everyone. If you have physical Bitcoins and have jumped through all the hoops this isn't for you but not everyone is you.

If someone has a brokerage account they can invest in BTC just as easily as they can buy a share in AAPL.  If someone has a 401K/IRA this would be the only possible way to invest in Bitcoins in a tax exempt manner. A hedge fund will find Bitcoin more viable if it is traded alongside thousands of other assets on NASDAQ or other major exchange and has high liquidity and depth.  

More options is always better right?

[mgio]

Wow so they are selling ALL their coins for a maximum amount of Fiat dollars and some find that its good news..

Sure, they are bulls in denial; grasping every last straw of hope for a news that will make the price rebound.
 

No, this is GREAT news.

This will greatly expand the bitcoin market by allowing many more people participate in bitcoin, which is one of it's biggest problems today.

Presently, you need to be awfully computer savvy just to buy a single bitcoin.

Those 200,000 coins will be bought up very quickly. This is extremely good news for bitcoin. If bitcoin is going to survive, institutional investors need to get involved and this is finally a way they can.

[Peter Lambert]

I still don't get it. Can someone explain me why anyone would invest in this?

Think of it this way: I have a bunch of money in my retirement account. If I take that money out of that account it gets hacked with wicked taxes. Now that they are opening this fund, I can use the money in my retirement account to invest in bitcoins. Hooray, no tax penalty!

[gmannn]

I still don't get it. Can someone explain me why anyone would invest in this?

The only reason such a trust makes even the slightest sense is for precious metals as they are hard to store in larger quantities. That's a problem Bitcoin doesn't have.

Why would anyone in his right mind buy these instead of buying Bitcoin directly? Unless people that have no Idea what Bitcoin is of course.


In case the reason to invest in this is obvious: This is a honest question.

I think if the application is accepted, it will open up BTC to institutional investors who can't risk client money on gox and other startup exchanges whose legal compliance is in question. 

I'm hoping this is the beginning of the end of gox.

[Akka]

Thx. For the answers. I'm still sceptic if that makes sense, though.

Especially of this:

I'm hoping this is the beginning of the end of gox.

Hopefully not this way. That are only "paper" Bitcoins that have been stripped of their use. So if this would be the way Bitcoin goes, all it would be is a store of value/investment.

This would be enough to financially make me very happy, but the idealist in me would scream in agony.

[ProfMac]

If someone has a 401K/IRA this would be the only possible way to invest in Bitcoins in a tax exempt manner.

My ears perk up.

[nebulus]

All this is very simple. They are going to raise a lot of money by using their BTC pile as a collateral and then they are going to use that money to fund bitcoin startups and make BTC more valuable. Pretty genious shit.

[Kazu]

For many people acquiring and safely storing Bitcoins is really complex. Isn't that reason enough?

This.


It took me about 2 weeks to figure out how to obtain bitcoins. And I already somewhat knew what I was doing, as I used Liberty Reserve. Imagine someone who doesn't know what an exchanger is, and has never sent a bank wire.

[Frozenlock]

And how do you get bitcoins once you have your ETF shares?

[Kazu]

Also side note, this proves that bitcoin 'deflation' won't ever happen in a healthy economy. People buy the ETF, the ETF funds startups, the startups get bitcoins, boom whatever bitcoins were in the ETF appear to have doubled.

Its just the inflation will be controlled by how much demand for debt there is, and with increased demand for debt comes increased interest rates, so if you save, you will always be making a little money (due to either interest or deflation depending on the economic climate).

[Rampion]

A nice scam.

How is it a scam?  Nobody is required to pay more than NAV if they do it is because they believe the asset will rise and thus the premium paid is just the cost of getting into a position now rather than waiting.  Slippage happens on exchanges is that a scam?  Price is currently $91.08 and you believe it will fall.  You can sell 100 BTC @ $91.08 but selling 500 BTC will drop the price to $90.98.  You are getting less than if you sell slowly, then again if you feel the price will fall below $90.98 before you can unload all 500 BTC @ $91.08 the premium paid for fast execution is worth it.

It would be like saying selling BTC for x on MtGox and buying it for y on BTC-E when x > y thus collecting a profit of x-y is a "scam".  It is called abritrage.  The fact that new shares can be issued or redeemed is what keeps the price inline with the underling asset.

For future reference ... just because you don't understand something doesn't make it a scam.  Many people call Bitcoin a scam using the same "logic".

I perfectly understand what an ETF is and how it works.

It's garbage, a worthless piece of paper, one of those "financial products" or "derivatives" that add nothing meaningful to the economy.

If you hold your private keys, you are holding the real thing. You can redeem them everywhere, no matter what. Bitcoins was born to be a trust-free, decentralized system to transfer and store value, and you have no need to trust the Winkle-evils to hold on your Bitcoins. How do you know that they are not issuing more shares than Bitcoin they hold? How do you know they won't file bankruptcy? How do you know you will be able to redeem the value their pieces of paper are supposed to have? How do you know their Bitcoins will not be stolen?

You don't know, you just buy a piece of paper that represents some Bitcoins that supposedly a third party is holding for you. Wow, genius, I guess Satoshi created Bitcoin precisely because he was in deep love with these amazing "financial products" based on promises that spread so much wealth between people. How could we survive without them?

It's just another form of debt, and thus essentially a scam. Everybody should man up and hold onto the real thing and throw away that useless paper issued by some guys who have never done anything in their lives (except suing Facebook, what genius entrepreneurs they are).

That said, these could be bullish news if the retard twins succeed. A scam, but bullish for BTC exchange rate. Just do not forget that these derivative crap has messed up the whole economy. I know for sure I won't touch one of those toilet papers with a bargepole.

[Jozzaboy]

A nice scam.

How is it a scam?  Nobody is required to pay more than NAV if they do it is because they believe the asset will rise and thus the premium paid is just the cost of getting into a position now rather than waiting.  Slippage happens on exchanges is that a scam?  Price is currently $91.08 and you believe it will fall.  You can sell 100 BTC @ $91.08 but selling 500 BTC will drop the price to $90.98.  You are getting less than if you sell slowly, then again if you feel the price will fall below $90.98 before you can unload all 500 BTC @ $91.08 the premium paid for fast execution is worth it.

It would be like saying selling BTC for x on MtGox and buying it for y on BTC-E when x > y thus collecting a profit of x-y is a "scam".  It is called abritrage.  The fact that new shares can be issued or redeemed is what keeps the price inline with the underling asset.

For future reference ... just because you don't understand something doesn't make it a scam.  Many people call Bitcoin a scam using the same "logic".

I perfectly understand what an ETF is and how it works.

It's garbage, a worthless piece of paper, one of those "financial products" or "derivatives" that add nothing meaningful to the economy.

If you hold your private keys, you are holding the real thing. You can redeem them everywhere, no matter what. Bitcoins was born to be a trust-free, decentralized system to transfer and store value, and you have no need to trust the Winkle-evils to hold on your Bitcoins. How do you know that they are not issuing more shares than Bitcoin they hold? How do you know they won't file bankruptcy? How do you know you will be able to redeem the value their pieces of paper are supposed to have? How do you know their Bitcoins will not be stolen?

You don't know, you just buy a piece of paper that represents some Bitcoins that supposedly a third party is holding for you. Wow, genius, I guess Satoshi created Bitcoin precisely because he was in deep love with these amazing "financial products" based on promises that spread so much wealth between people. How could we survive without them?

It's just another form of debt, and thus essentially a scam. Everybody should man up and hold onto the real thing and throw away that useless paper issued by some guys who have never done anything in their lives (except suing Facebook, what genius entrepreneurs they are).

That said, these could be bullish news if the retard twins succeed. A scam, but bullish for BTC exchange rate. Just do not forget that these derivative crap has messed up the whole economy. I know for sure I won't touch one of those toilet papers with a bargepole.

Maybe, maybe not. As long as the papers are not inflated past their worth and work as a form of receipt for the W-twins to privately transfer their BTC to easily setup wallets... they could pull it off.

[Kazu]

How do you know that they are not issuing more shares than Bitcoin they hold?

its an etf for goodness sake, they are legally obligated to obtain the bitcoins for the shares they issue else they can't issue the shares.

Its not a weird derivative, its an ETF. ETFs are normal and perfectly OK, otherwise you wouldn't even be able to trade things like volatility and futures (which actually ARE weird derivatives) like a stock.

I don't understand why people get so mad about an ETF. When you (or at least, most people) buy a computer, they don't individually pick out each component they need then build the computer. They buy the computer which comes with all the components in a easy bundle. An ETF is the exact same thing - a bundle that allows the seller to make a bit more money due to the convenience factor - except for securities not physical objects. How is that a scam?

Gee, people here are always going on about the free market except when an even mildly exotic financial instrument gets thrown into the situation they completely freak. The funny part is everybody's perfectly OK with CFDs, which actually are 'fake' or 'paper' bitcoins, but a ETF? FREAK OUT TIME.