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[Rampion]

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.

+1

I like this guy. No bullshit approach to breaking apart FUD.

FUD? Did anything I wrote caused Fear, Uncertainity and Doubt in you? Well, you are really faint hearted then.

Winkle-evil's Bitcoin ETF is just a laughable attempt at market making. ETFs are a "normal" tool for speculative manipulation, especially ETFs related to physical commodities. JP Morgan has been using its tricks to heavily manipulate the silver market for years. Everybody in silver is bitching about them, but now if the Winkle-evil's do the same thing in BTC everyone cheers them because that will very possibly increase the BTC price in the short term, which is the only thing most of people in here cares about.

The Winkle-evil's shares are just worthless pieces of paper. Nobody sane would believe he is holding any Bitcoins by owning their shares. There's no way to redeem those shares for blockchain BTC, right?

BTW, Kazu says ETFs are a "bundle"... What are the Winkle-evil's bundling together? Nothing. He says that "they are legally obligated" not to scam. Yeah, like everybody else, still these are tools used for fools to be parted with their money on a recurrent basis.

As I said earlier, I won't be touching their toilet paper with a bargepole, but still I believe their eventual success would be bullish for the BTC/USD exchange rate. It would add liquidity for sure, but on the other side also a powerful manipulation tool.

[N12]

JP Morgan has been using its tricks to heavily manipulate the silver market for years. Everybody in silver is bitching about them, but now if the Winkle-evil's do the same thing in BTC everyone cheers them because that will very possibly increase the BTC price in the short term, which is the only thing most of people in here cares about.

It's pretty pathetic and destructive and it's not only here, it's the majority of bitcointalk and r/bitcoin who are happy to scam the unsuspecting public out of the option to withdraw Bitcoins and store them as long as it makes the current Bitcoin holders money. This is nowhere like with gold where it's simply unfeasible. Unfortunately this has become the world we live in.

Regardless, it probably won't be approved by the SEC anyway.

[jl2012]

JP Morgan has been using its tricks to heavily manipulate the silver market for years. Everybody in silver is bitching about them, but now if the Winkle-evil's do the same thing in BTC everyone cheers them because that will very possibly increase the BTC price in the short term, which is the only thing most of people in here cares about.

It's pretty pathetic and destructive and it's not only here, it's the majority of bitcointalk and r/bitcoin who are happy to scam the unsuspecting public out of the option to withdraw Bitcoins and store them as long as it makes the current Bitcoin holders money. This is nowhere like with gold where it's simply unfeasible. Unfortunately this has become the world we live in.

Regardless, it probably won't be approved by the SEC anyway.

Every single satoshi in ETF should be backed by real bitcoin. If they publish their cold storage addresses to prove they are not short-selling paper bitcoin, I can't see why this is not good

[MikeH]

What does all this mean? The ETF is worth less than the actual Bitcoins. So people will be naturally encouraged to slowly redeem their ETF for Bitcoins, not the other way around. This means that the ETF serves more as a newfangled vehicle of exchange, that charges a fee for the convenience of exchange (just like, say bitinstant) rather than a defacto JPMorgan-issued pseudo-currency.

and when they redeem for bitcoins the price drops as has been the case with the transfer from GLD to physical of late.

[MikeH]

there has been talk recently that ALL markets are manipulated so a BTC ETF will be the same, just hope it's manipulated upwards.

[flipperfish]

JP Morgan has been using its tricks to heavily manipulate the silver market for years. Everybody in silver is bitching about them, but now if the Winkle-evil's do the same thing in BTC everyone cheers them because that will very possibly increase the BTC price in the short term, which is the only thing most of people in here cares about.

It's pretty pathetic and destructive and it's not only here, it's the majority of bitcointalk and r/bitcoin who are happy to scam the unsuspecting public out of the option to withdraw Bitcoins and store them as long as it makes the current Bitcoin holders money. This is nowhere like with gold where it's simply unfeasible. Unfortunately this has become the world we live in.

Regardless, it probably won't be approved by the SEC anyway.

Every single satoshi in ETF should be backed by real bitcoin. If they publish their cold storage addresses to prove they are not short-selling paper bitcoin, I can't see why this is not good

This. And I really hope they do that once the ETF is sold on an exchange and the majority of the shareholders care about checking this from time to time.

Even if it's a way for these guys to sell their bitcoins, it's a way for other people to buy some without having to fear lost passwords, having relied on the wrong encryption schemes or other technical stuff.

[Qoheleth]

Winkle-evil's

Okay first off, I hope you realize that this sort of thing has never not looked ridiculous.

JP Morgan has been using its tricks to heavily manipulate the silver market for years. Everybody in silver is bitching about them, but now if the Winkle-evil's do the same thing in BTC everyone cheers them because that will very possibly increase the BTC price in the short term, which is the only thing most of people in here cares about.

JP Morgan isn't the issuer of paper silver - they're just a third party who has a lot of money to short it with. Like, I'm not saying people aren't going to do that with this ETF, but you're comparing apples to oranges if you say the issuers here are doing the same thing as JP Morgan is doing.

And as an aside, I don't care about whether this pushes the price up or down. That's not the point. The point is so that BTC - or paper that performs roughly like BTC - can integrate with the traditional infrastructure for regular people (e.g. in IRAs).

The Winkle-evil's shares are just worthless pieces of paper. Nobody sane would believe he is holding any Bitcoins by owning their shares. There's no way to redeem those shares for blockchain BTC, right?

There is if you've got enough of them - that's right in the prospectus. Admittedly, that's not so useful for a small investor, but "needs to be redeems in a big batch" is a long way from "totally irredeemable".

[EuroTrash]

isn't anyone starting thinking that the Winklevoss brothers have a natural talent for getting the business "almost" right and yet never really make it?

NB: no trolling intended, just a joke. I am holding a big bag of coins like many here (and nope I am not selling).

[Luckybit]

It's not practical or easy to own Bitcoins. Thats why so few own any.

I'm dumbstruck.

It's 3 steps.

1) https://www.bitaddress.org  (60 seconds)
2) Print & Store (60 seconds)
3) Publish Address and get to work. (A life time)

Without massive amounts of investment there wont be enough market capitalization to create any jobs.

When a Bitcoin is worth a few thousand each then there will be more jobs but when they are worth only $100 it's only a billion dollar economy so there are no jobs. Basically you gotta have investors before you can start businesses which is where the jobs come from.

[MikeH]

Every single satoshi in ETF should be backed by real bitcoin. If they publish their cold storage addresses to prove they are not short-selling paper bitcoin, I can't see why this is not good

yea I wouldn't trust it without evidence no matter legal requirements - banks have settled with cash as they didn't have the gold they were supposed to.

[Frizz23]

As much as I love the idea of Bitcoin ... but the Wankervoss Twins are the #1 reason why I wish Bitcoin to fail.

[DeathAndTaxes]

That's the attack I'm proposing, and why I think that even though the Winklevosses can't really cheat, this bitcoin paper can still exist at over-unity to the actual specie.

If the paper Bitcoins trade at higher than actual Bitcoins one can instantly collect a risk free profit.

Example:  1 share = 0.2 BTC.  The average bid for depth of 50,000 shares is currently 0.21 BTC (obviously it will be in USD but 0.21 BTC equivalent).

Sell short 50,0000 shares @ 0.21 BTC
Deposit 10,000 BTC with trustee
Trustee issues 50,000 new shares
Use new shares to cover short.

Net-net bought @ 0.20 BTC, sold @0.21 BTC.  Gain 0.01 BTC per shares * 50,000 shares = 500 BTC.

The ability for the fund to have subsequent share issue and redemption is a mechanism to "balance" the ETF and ensure it will trade very close to NAV.

[DeathAndTaxes]

Every single satoshi in ETF should be backed by real bitcoin. If they publish their cold storage addresses to prove they are not short-selling paper bitcoin, I can't see why this is not good

yea I wouldn't trust it without evidence no matter legal requirements - banks have settled with cash as they didn't have the gold they were supposed to.

Nice thing about Bitcoin is it would be possible to provide cryptographic proof of ownership.  Move coins to holding addresses (with encrypted private keys in vault).  Since redemption and issuance is always in basket of 50,000 shares (1,000 BTC) it would make sense to use 1 address = 1 basket.

Provide public addresses and digitally sign a message stating ownership with private key.

The digital signature provides irrefutable proof the trust has ownership of the private key.
The blockchain provides continual audit that the coins haven't been spent/moved.
If shares are redeemed or new shares are issued that is also provable.

Essentially at all times the number of BTC in digitally signed holding addresses should always reflect NAV (initially 0.2 BTC) * shares outstanding.

[eldentyrell]

Nice thing about Bitcoin is it would be possible to provide cryptographic proof of ownership.  Move coins to holding addresses (with encrypted private keys in vault).  Since redemption and issuance is always in basket of 50,000 shares (1,000 BTC) it would make sense to use 1 address = 1 basket.

Provide public addresses and digitally sign a message stating ownership with private key.

Yes, indeed.  They can block the GLD funny-business if they choose to.

If the Winklevoss twins don't do this for their ETF, somebody will surely launch one (or try to launch one) that does.

What would be weirdest, though, would be if the SEC approves an ETF that doesn't sign proof of ownership (the Winklevoss' or another) and somehow never gets around to approving the application of an ETF that does sign proof of ownership, or keeps coming up with lame excuses for rejecting it.

At least, if I were Ben Bernanke, that's what I'd orchestrate.

The other disconcerting possibility is double-counting coins held by an exchange (such as Gox).  Since none of the exchanges publish proof-of-ownership for their deposit base the proof of ownership for those coins is available for "lending" out to ETFs.

[cryptoanarchist]

For being so rich and famous, this is soooo stupid.

[Kazu]

Ok so the issue with this is that eventually that 5000 shares are going to have to be paid back, and since brokerages aren't a big fan of letting you essentially form a ponzi scheme with them as the lender, they're going to trigger margin calls. Think about it this way, you know John Law's land scheme? Its essentially that, except in reverse. So it might work for a while, but it will eventually fail, and at that time Bitcoin will have to revert to higher than it was thanks to interest & margin calls.

Sure, if I'm going through a broker. But if I'm a bank with a seat on the exchange, and I'm careful to always cover my shorts before the T-3 delivery deadline, then who has the authority to issue a margin call against them?

The SEC?

Um, somebody has to be there to lend you the ETF in order for you to be able to short it. Whoever lends you that ETF. What are you going to cause the issuance of more ETF only to short it? I suppose you could be a bank and accept 'deposits' in BTC, which would allow you to do so, only thats contingent upon somebody actually depositing btc.

In order to short BTC, you have to be able to borrow BTC/ETF. Who is going to be loaning you that BTC/ETF? With Gold, its easy: You issue shares of the GLD, buy some gold miner, issue gold futures on that gold miner, 'loan' those futures to yourself to back your ETF, then sell your ETF.

With Bitcoin, even assuming there is such a thing as Bitcoin futures, its clearly a lot harder, or at least a lot easier for people to tell you are trolling big time. There is basically a fixed amount of BTC created every period of time, so if the futures exceed that expected supply, then they essentially go into backwardation for that amount. Thus, assuming people aren't idiots, the worst thing that they could possibly do is, until the next halving, up the perceived supply of bitcoins by the amount of Bitcoins that would be mined until the next futures expiration date. And then, once the next halving day happens, they can't loan themselves enough futures to make up for their debts, and then they actually have to pay back their uncovered shorts (well, half of them) which will either cause (A) the bitcoin price to exceed that at the time the shorting began in the first place by the interest over that period PLUS the backwardation over that period of time PLUS any amount the price got bid up just before the halving day OR (B) they forclose, and screw over their future contracts, causing a whole bunch of people that thought they'd have BTC to no longer have it, and now need it, causing major contraction in Bitcoin supply, causing the same end result.

With Gold, there is actually times where they can literally short the futures and randomly make money from it (due to contango). Why? Because there are a TON of futures that will only constantly be rolled into new futures and nobody will ever know. Silver is even worse.

http://www.cmegroup.com/trading/metals/precious/silver.html

OUCH

[Qoheleth]

Um, somebody has to be there to lend you the ETF in order for you to be able to short it.

Wrong!

[Kazu]

Um, somebody has to be there to lend you the ETF in order for you to be able to short it.

Wrong!

This is just a different spin on the same practice. In order to benefit from it going down you are either going to need to (A) borrow the share right now, sell it, re-buy it and pay back the loaner, or (B) write calls or (C) buy puts. You could also (D) troll the settlement time, but thats a different deal. Sure, technically you aren't going to have to 'borrow' from the buyer of your call, but you still need someone else as the buyer of the option, who effectively serves as your lender. By borrowing from someone I mean have someone on the other side of the trade that knows I am shorting and can obviously view the market depth of those options.

[BitChick]

isn't anyone starting thinking that the Winklevoss brothers have a natural talent for getting the business "almost" right and yet never really make it?

NB: no trolling intended, just a joke. I am holding a big bag of coins like many here (and nope I am not selling).

But at least they seem to have an idea what will succeed or not?  They had some insight to think that Facebook would work.

So I guess I am pulling for them on this one for sure! 

[byronbb]

PS anyone with large holdings of coins should be doing this at a smaller scale. Forming a business whose assets are 100% bitcoins then piecing out shares to investors and imposing a frictional cost to buying and selling.