GBTC Bitcoin Investment Trust Observer

[BitAddict]

If I understand there won't really be any "new" money coming into bitcoin.  The only way I can buy shares is if somebody in the trust is willing to sell.  The trust won't be buying new bitcoins like the winklevoss thing. 

As always, qualified accredited investors may choose to invest in shares of the BIT directly through the BIT's ongoing private placement at the daily NAV/share¹.

But in that case they would have to wait one year until being able to sell those new BIT shares.

[JorgeStolfi]

If I understand there won't really be any "new" money coming into bitcoin.  The only way I can buy shares is if somebody in the trust is willing to sell.  The trust won't be buying new bitcoins like the winklevoss thing. 

As always, qualified accredited investors may choose to invest in shares of the BIT directly through the BIT's ongoing private placement at the daily NAV/share¹.

But in that case they would have to wait one year until being able to sell those new BIT shares.

And they would have to buy the bitcoins themselves, isn't it so?  Or am I misreading their Sep/2013 document?

[Alley]

It really just seems like a way for early trust investors to dump there shares.

[David Rabahy]

If I understand there won't really be any "new" money coming into bitcoin.  The only way I can buy shares is if somebody in the trust is willing to sell.  The trust won't be buying new bitcoins like the winklevoss thing. 

As always, qualified accredited investors may choose to invest in shares of the BIT directly through the BIT's ongoing private placement at the daily NAV/share¹.

But in that case they would have to wait one year until being able to sell those new BIT shares.

And they would have to buy the bitcoins themselves, isn't it so?  Or am I misreading their Sep/2013 document?

The company that runs BIT buys the bitcoins; investors do not.  Investors buy shares of BIT.  Originally there was a period of no redemptions until BIT was ready for that (April 2015?); there was some amount of time when redemptions were indeed available.  Since then that path for getting out is now closed.  Now there are no redemptions until the ETF is up.  Personally I bought into BIT with Roth IRA monies with no intention of ever selling; if it is goes to $0/btc then so be it; one less cruise during retirement?  Maybe.  If it goes to the moon then won't my kids be happy.

[David Rabahy]

Investor Letter – March 26, 2015
info@grayscale.co

OTCQX® Update

We are pleased to announce that the Bitcoin Investment Trust (BIT) has been approved by OTC Markets for eligible BIT shares to be quoted on OTCQX®, the top marketplace operated by OTC Markets Group, under the Alternative Reporting Standards. For information on transferring your shares to your brokerage account, please review the material under “Steps to Sell Shares…”

As a reminder, it is important to note the price of shares traded on OTCQX® will be established by market bids and asks and will not necessarily reflect the BIT’s NAV/share or the spot price of bitcoin. In addition, no assurances can be given as to whether an active public secondary market for the shares will develop or be maintained.

As always, qualified accredited investors may choose to invest in shares of the BIT directly through the BIT’s ongoing private placement at the daily NAV/share¹. Please note that BIT shares purchased through the ongoing private placement are subject to significant resale and transferability limitations and will not be eligible to be sold on OTCQX® until held for more than one year. BIT shares purchased on OTCQX®, however, are freely tradable once purchased.

Steps to Sell Shares on OTCQX®

Investors who have held BIT shares for at least 12 months will be eligible to sell those shares on
OTCQX®.

Shareholders should have their shares transferred electronically to their brokerage account as follows.

• Our transfer agent, Continental Stock Transfer & Trust, will be providing each eligible shareholder a share ownership statement. You will receive an e-mail from us in the coming days with a copy of this statement.
• The statement will include the details necessary to have your shares electronically transferred via Direct Registration System (DRS) to the broker of your choice. Details may slightly vary by brokerage firm, so we encourage you to reach out to your broker to complete the transfer.
• Once your shares have been transferred to your brokerage account, you will be able to place an order to sell your shares.
• Shareholders may continue to hold their shares in DRS book-entry form with Continental if you so choose.
• If you have any questions regarding your share ownership statement, if your address has recently changed, or if you have any other questions at this time regarding transferring your shares to your own brokerage account, please contact Continental at (800) 509-5586 or (212) 509-4000.

As always, please do not hesitate to contact us with any questions or concerns about this process.

To the extent that you do not already have a brokerage account and would like to establish one, we can put you in contact with Merriman Capital, the broker dealer that is both the BIT’s initial market maker and its Designated Advisor for Disclosure (DAD).


Should you have any questions or comments regarding this information, please feel free to contact us at info@grayscale.co or 212-668-6682.


¹ The BIT’s NAV/share will be published each U.S. business day on the sponsor’s website: www.grayscale.co

[Kupsi]

It's live, but no one wants to sell  

https://twitter.com/barrysilbert/status/581167061101092864

[David Rabahy]

http://www.otcmarkets.com/stock/GBTC/chart

[chriswen]

It's live, but no one wants to sell  

https://twitter.com/barrysilbert/status/581167061101092864

People might also not have there shares to sell yet.

[David Rabahy]

With a bid of $31.50 as compared to the closing yesterday of $23.70 we should sell short (effectively covered) and then close the short position as quickly as possible when BIT shares are transferred into the ETF.  Free money.

[uhoh]

Top bid is now $50, from KCG

[teek]

With a bid of $31.50 as compared to the closing yesterday of $23.70 we should sell short (effectively covered) and then close the short position as quickly as possible when BIT shares are transferred into the ETF.  Free money.

A little out of the loop in the whole small cap world..   Will most brokers allow you to sell short?   Don't they have to actually have shares available to borrow?  IE:  no naked shenanigans ?

[bobabouey2]

All the bids have the qualifier "u" after the market maker name, which means "unsolicited" customer indication of interest.  I think this means it is not the market maker who is bidding as part of market maker activities, but it is one of their customers making the bid.

The asks are marked "u" which apparantly means an "unpriced indication of interest."

So there are retail customers playing around with high prices to see if someone bites, but it could also be there are brokers who do have shares to sell they are seeking quotes on.  Its not clear to me if they have to have the shares available in order to list the as as "unpriced indication of interest."

http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=4514&print=1

[Roy Badami]

If I understand correctly the above file (from page 31 onwards), the BIT fund will no longer sell or redeem shares for dollars, only for bitcoins.  That is, a broker gives 10 BTC to BIT, gets 100 BIT shares; or the reverse.

I think you're correct.  Although at that time (and probably still now) the only broker acting to create shares in Bitcoin Investment Trust would have been SecondMarket.  (Remember that legally, BIT and SecondMarket are separate entities.)  Over time other brokers may get involved, so perhaps in future not all new money will have to flow through SecondMarket.

roy

[bobabouey2]

All the bids have the qualifier "u" after the market maker name, which means "unsolicited" customer indication of interest.  I think this means it is not the market maker who is bidding as part of market maker activities, but it is one of their customers making the bid.

The asks are marked "u" which apparantly means an "unpriced indication of interest."

So there are retail customers playing around with high prices to see if someone bites, but it could also be there are brokers who do have shares to sell they are seeking quotes on.  Its not clear to me if they have to have the shares available in order to list the as as "unpriced indication of interest."

http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=4514&print=1

I think the $199.5 bid at 1 just proved my point, or its someone who doesn't realize the fund is 1/10 of bitcoin!

And note the only broker without the "u" after their name is Merriman, which is the advisor for the fund.

[David Rabahy]

With a bid of $31.50 as compared to the closing yesterday of $23.70 we should sell short (effectively covered) and then close the short position as quickly as possible when BIT shares are transferred into the ETF.  Free money.

A little out of the loop in the whole small cap world..   Will most brokers allow you to sell short?   Don't they have to actually have shares available to borrow?  IE:  no naked shenanigans ?

I called; you're right, no naked sells.  *sigh*  The sooner I can get my shares transferred over the better but I just bet the pricing anomaly will be gone by then.

[JorgeStolfi]

The company that runs BIT buys the bitcoins; investors do not.  Investors buy shares of BIT.  [ ... ]  Personally I bought into BIT with Roth IRA monies

That was the case before last October.  But now the procedures seem to have changed considerably.  The company that manages the fund is now (?) Grayscale, and shares are traded through a hierarchy of brokers.  From their financial report and filing dated 2014-09-30, pg. 31+, I understand that SecondMarket and Grayscale no longer take dollars and no longer buy or sell bitcoins.  I understand that brokers must buy shares from Grayscale with bitcoins only, and when they redeem they will get bitcoins from Grayscale.  Am I reading wrong?

[JorgeStolfi]

I think the $199.5 bid at 1 just proved my point, or its someone who doesn't realize the fund is 1/10 of bitcoin!

Perhaps those bids are just the 2nd level brokers testing the system, and the bids are not being filled because those brokers have nothing to sell yet?

[Roy Badami]

The company that runs BIT buys the bitcoins; investors do not.  Investors buy shares of BIT.  [ ... ]  Personally I bought into BIT with Roth IRA monies

That was the case before last October.  But now the procedures seem to have changed considerably.  The company that manages the fund is now (?) Grayscale, and shares are traded through a hierarchy of brokers.  From their financial report and filing dated 2014-09-30, pg. 31+, I understand that SecondMarket and Grayscale no longer take dollars and no longer buy or sell bitcoins.  I understand that brokers must buy shares from Grayscale with bitcoins only, and when they redeem they will get bitcoins from Grayscale.  Am I reading wrong?

Bottom of p32 of the Interim Financial Report (linked from http://www.otcmarkets.com/stock/GBTC/filings ) says

As of the date of this Disclosure Statement, SecondMarket, Inc. has signed a Participant Agreement with the Sponsor and the Trust and may create and redeem Baskets.

[JorgeStolfi]

Bottom of p32 of the Interim Financial Statement (linked from http://www.otcmarkets.com/stock/GBTC/filings ) says

As of the date of this Disclosure Statement, SecondMarket, Inc. has signed a Participant Agreement with the Sponsor and the Trust and may create and redeem Baskets.

So, do you understand that as meaning that SecondMarket can still sell and (perhaps) redeem shares to investors using dollars?  In which case SecondMarket (but not Greyscale) would still buy and sell bitcoins on the exchanges?

[Roy Badami]

Bottom of p32 of the Interim Financial Statement (linked from http://www.otcmarkets.com/stock/GBTC/filings ) says

As of the date of this Disclosure Statement, SecondMarket, Inc. has signed a Participant Agreement with the Sponsor and the Trust and may create and redeem Baskets.

So, do you understand that as meaning that SecondMarket can still sell and (perhaps) redeem shares to investors using dollars?  In which case SecondMarket (but not Greyscale) would still buy and sell bitcoins on the exchanges?

Well, presumably any Authorized Participant which has signed a Participant Agreement can create new shares, and the Authorized Participants might change from time to time.  I don't know how to find out who the current Authorized Participants are, so sure, SecondMarket may or may not be an Authorized Participant at this point in time.

AIUI no one can redeem shares atm.  They had to suspend redemption because of a technicality in the SEC rules - I think it's because you're not allowed to be simultaneously offering new shares and at the same time offering to redeem old shares.