2013-07-01 WSJ - Winklevoss Twins File to Launch Bitcoin Exchange-Traded Product

[CurbsideProphet]

Watching this. Looks interesting.

Smoothie, wanna start a Litecoin ETP now?  

The interesting thing is the filing keeps referring to their holdings as "math-based assets."  I'm wondering if this leaves room for alt currencies.

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[Foxpup]

The interesting thing is the filing keeps referring to their holdings as "math-based assets."  I'm wondering if this leaves room for alt currencies.

Actually, the filing never refers to their holdings as just "math-based assets", it specifically refers to their holdings as "Bitcoins", defined as "a type of a Digital Math-Based Asset". The filing does refer to altcoins as examples of alternative Digital Math-Based Assets and Bitcoin's competion, though the Trust does not deal in anything other than bitcoins specifically.

[DeathAndTaxes]

The interesting thing is the filing keeps referring to their holdings as "math-based assets."  I'm wondering if this leaves room for alt currencies.

Actually, the filing never refers to their holdings as just "math-based assets", it specifically refers to their holdings as "Bitcoins", defined as "a type of a Digital Math-Based Asset". The filing does refer to altcoins as examples of alternative Digital Math-Based Assets and Bitcoin's competion, though the Trust does not deal in anything other than bitcoins specifically.

Exactly.  Even if there was demand for a ETF for an alternative CC it wouldn't make sense for a single ETF and single trust to handle both.  I mean there are Physical Gold ETFs and Physical Silver ETFs but you don't see mixed Silver & Gold ETFs.  Ticker symbols are cheap and there are thousands of ETFs.  If the first one gets approved and there is demand no reason you couldn't have a whole family of CC based ETFs.

[kjlimo]

What will be the smallest number of shares one can buy?

1? Or 100?  More?

[Seal]

I'd like to know their model for trading the underlying asset. Where will the balance be held and who by? The Winkelvii?

I hope they do it right. The last thing we need is a crash caused by a bucket shop operation.

[vokain]

I'd like to know their model for trading the underlying asset. Where will the balance be held and who by? The Winkelvii?

I hope they do it right. The last thing we need is a crash caused by a bucket shop operation.

Apparently they're hiding the private key for the underlying asset in a US bank vault.

[rpietila]

Exactly.  Even if there was demand for a ETF for an alternative CC it wouldn't make sense for a single ETF and single trust to handle both.  I mean there are Physical Gold ETFs and Physical Silver ETFs but you don't see mixed Silver & Gold ETFs.  Ticker symbols are cheap and there are thousands of ETFs.  If the first one gets approved and there is demand no reason you couldn't have a whole family of CC based ETFs.

There is the Central Fund of Canada. It is not actually ETF iirc though, but a company whose idea is to act as ETF before they existed.

[willphase]

the winkelvii aren't trading bitcoin here, they are just offering shares in their company that holds bitcoin.

If they have 1% of all bitcoins, that's 100,000 BTC which is approximately 100M USD - so this is the valuation of their 'company'.  They are offering stock in approximately 20M USD and so you will own part of the company whose valuation will float on the price of bitcoin.  They will keep 80% of the company and sell stock up to 20%.

There is nothing new in what they are doing here - just offering stock in a company.  All the winkelvii are doing is spreading their risk - they aren't selling bitcoins or trading bitcoins from fiat.  This doesn't seem that much of a big deal to me other than the media attention this will garner.

Will

[Foxpup]

the winkelvii aren't trading bitcoin here, they are just offering shares in their company that holds bitcoin.

If they have 1% of all bitcoins, that's 100,000 BTC which is approximately 100M USD - so this is the valuation of their 'company'.  They are offering stock in approximately 20M USD and so you will own part of the company whose valuation will float on the price of bitcoin.  They will keep 80% of the company and sell stock up to 20%.

There is nothing new in what they are doing here - just offering stock in a company.  All the winkelvii are doing is spreading their risk - they aren't selling bitcoins or trading bitcoins from fiat.  This doesn't seem that much of a big deal to me other than the media attention this will garner.

Will

No, that's not what they're doing at all. It is not a company and in no way resembles a company. It is a trust that holds bitcoins and issues shares that represent a claim of ownership on those bitcoins and can be redeemed for those bitcoins by any trustor at any time (conversely, the trust will "buy" bitcoins from trustors by issuing new shares in exchange). The basic idea is that investors will buy the shares from the trustors and then trade them on a public exchange such as NASDAQ, but no bitcoins will actually change hands until the shares are redeemed or new shares are issued (which will happen due to arbitrage if the share price deviates too far from the price of actual bitcoins). This is pretty much exactly the same way commodity ETFs are issued and traded.

EDIT: Typo

[J.Jade]

I never understood what's the advantage of buying shares in a trust over buying the underlying commodity itself.

Well i'm just a private individual not a VC though.

[kiko]

Some twitter snark picked up from the comments at Hacker News:
https://news.ycombinator.com/item?id=5973971

Favorite snarky tweets in my feed...

"Bitcoin ETF" is an anagram of "Fiction Bet" which seems pretty apt.. https://twitter.com/LorcanRK/status/351840221773578241
Bitcoin ETF ticker ideas: $DCHE $LOSS $ZERO $SCAM (via @jamesvonsimson - his idea: $SCKR) https://twitter.com/finansakrobat/status/351837836724551682
Well, at least the Winkelvii Bitcoin trust is consistent with their practice of being parasitic on new innovation… https://twitter.com/EpicureanDeal/status/351834917593817088
The Winkelvoss Bitcoin ETF is the first of many wonderful deals brought to you by the JOBS Act (Just Open Bucket Shops). https://twitter.com/ReformedBroker/status/351830441646489601
Imagine the call "if you got burned on the Facebook IPO, why don't you take the Winklevoss Bitcoin Trust for a spin?" https://twitter.com/BarbarianCap/status/351825104147189760

[Foxpup]

I never understood what's the advantage of buying shares in a trust over buying the underlying commodity itself.

Well i'm just a private individual not a VC though.

I'm also just a private individual. That's why I don't have a massive, impenetrable vault in my basement for storing my gold, instead I just buy gold ETFs. Similarly, although I have the technical experience to safely store my bitcoins, most people do not. These people will certainly not buy actual bitcoins, but they may be willing to invest in a bitcoin ETF where they don't have to worry about that. That's the advantage.

[btceic]

This story is spreading, now on bloomberg tv headlines.

[J.Jade]

I never understood what's the advantage of buying shares in a trust over buying the underlying commodity itself.

Well i'm just a private individual not a VC though.

I'm also just a private individual. That's why I don't have a massive, impenetrable vault in my basement for storing my gold, instead I just buy gold ETFs. Similarly, although I have the technical experience to safely store my bitcoins, most people do not. These people will certainly not buy actual bitcoins, but they may be willing to invest in a bitcoin ETF where they don't have to worry about that. That's the advantage.

However this advantage comes with the added risk of not directly controlling the commodity and having to trust the ETF entity so I doubt it is a true advantage.
Neither gold or bitcoins need much storage space. And in case you own considerable amounts you can also afford extra security.

[Rygon]

I didn't read the filing, but I hope they publish the public key where the holdings will be stored. Instant audit.

[P_Shep]

This story is spreading, now on bloomberg tv headlines.

More importantly, those teeth look ridiculous.

[willphase]

the winkelvii aren't trading bitcoin here, they are just offering shares in their company that holds bitcoin.

If they have 1% of all bitcoins, that's 100,000 BTC which is approximately 100M USD - so this is the valuation of their 'company'.  They are offering stock in approximately 20M USD and so you will own part of the company whose valuation will float on the price of bitcoin.  They will keep 80% of the company and sell stock up to 20%.

There is nothing new in what they are doing here - just offering stock in a company.  All the winkelvii are doing is spreading their risk - they aren't selling bitcoins or trading bitcoins from fiat.  This doesn't seem that much of a big deal to me other than the media attention this will garner.

Will

No, that's not what they're doing at all. It is not a company and in no way resembles a company. It is a trust that holds bitcoins and issues shares that represent a claim of ownership on those bitcoins and can be redeemed for those bitcoins by any trustor at any time

Thanks for the info. I stand corrected.

Will

[bitster]

There is a poll today on yahoo finance about this most of the choices as well as the votes are negative tho. 

[btceic]

There is a poll today on yahoo finance about this most of the choices as well as the votes are negative tho.  

link? found it

[Scott J]

There is a poll today on yahoo finance about this most of the choices as well as the votes are negative tho.  

link? found it

link?