GBTC Bitcoin Investment Trust Observer

[tabnloz]

OMFG! It has been online 1 whole day, what a failure.

If Silbert and co have put so much time and money into this thing without some inkling of interest or necessity, then the market will spit them out.

Zooming out to a distance, that doesn't seem to be the case.

Ridiculous to proclaim it a turd after 24 hrs.

[1714952081]

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[1714952081]

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[1714952081]

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[jl2012]

Seems like this will have little effect on exchange prices since no new bitcoins are being bought. 

Well they're buying existing Bitcoin. The influence on the price is just about the same influence as any trading on a regular exchange has on the price, nothing more, nothing less. Of course the influence isn't as direct and immediate, but overall it's a closed system, actually.

Any large discrepancy between the GBTC price and the market price of "raw" BTC will probably take months to a year to be equalized by arbitrage, since shares will have to be redeemed, or created and then held for a year.  Isn't this so?

Still, I'm pretty surprised as no one is selling to the 5000BTC wall @$350. It's quick money. Maybe related to taxation issues?

[lay785]

Seems like this will have little effect on exchange prices since no new bitcoins are being bought.  

Well they're buying existing Bitcoin. The influence on the price is just about the same influence as any trading on a regular exchange has on the price, nothing more, nothing less. Of course the influence isn't as direct and immediate, but overall it's a closed system, actually.

Any large discrepancy between the GBTC price and the market price of "raw" BTC will probably take months to a year to be equalized by arbitrage, since shares will have to be redeemed, or created and then held for a year.  Isn't this so?

Still, I'm pretty surprised as no one is selling to the 5000BTC wall @$350. It's quick money. Maybe related to taxation issues?

just sell the 5k BTC and buy some new BTCs for $235ea... Massive arbitrage profit... No losses possible if you were planning on holding anyway...

[ElectricMucus]

OMFG! It has been online 1 whole day, what a failure.

If Silbert and co have put so much time and money into this thing without some inkling of interest or necessity, then the market will spit them out.

Zooming out to a distance, that doesn't seem to be the case.

Ridiculous to proclaim it a turd after 24 hrs.

Lets see how it is in a week.. Any random altcoin generates more of everything just in the first hours, just saying.
Who knows maybe it'll catch up, but the notion that retail investors will be storming into this has been pretty much debunked now.

[inca]

OMFG! It has been online 1 whole day, what a failure.

If Silbert and co have put so much time and money into this thing without some inkling of interest or necessity, then the market will spit them out.

Zooming out to a distance, that doesn't seem to be the case.

Ridiculous to proclaim it a turd after 24 hrs.

Lets see how it is in a week.. Any random altcoin generates more of everything just in the first hours, just saying.
Who knows maybe it'll catch up, but the notion that retail investors will be storming into this has been pretty much debunked now.

I am still waiting for your prediction about Coinbase running with their users funds to come true. You have a tendency to..how shall I put it..see the glass half full. I am sure you are great fun at parties.

Most people would say that after one day of thin trading at a massive premium to the exchange price it is far too early to see how this will play out.

For now the large traders with an interest in the price falling are selling the price lower to try and prevent average joe from getting excited about GBTC and start closing the arb upwards.

[phoenix1]

For now the large traders with an interest in the price falling are selling the price lower to try and prevent average joe from getting excited about GBTC and start closing the arb upwards.

LMAO!
Do you really think that is what is going on? 

[criptix]

350 $ x 5000 btc = 1.750.000 $

240 $ x 5000 btc = 1.200.000 $

lets say all fees together are 10% (they are less)

--> 1.750 M $ - 1.250 M $ = 550.000 $

--> 550.000 x 0.9 = 500.000 $

conclusion:

500.000 $ for some mouse clicks?

seems second market costumer are too rich, 500.000$ not worth the 5 mouse clicks.

[elux]

All available supply got bought out on day 1, regardless of price:
 
https://www.reddit.com/r/Bitcoin/comments/34vuku/congratulations_bitcoin_on_your_new_ath_133700/

[skivrmt]

350 $ x 5000 btc = 1.750.000 $

240 $ x 5000 btc = 1.200.000 $

lets say all fees together are 10% (they are less)

--> 1.750 M $ - 1.250 M $ = 550.000 $

--> 550.000 x 0.9 = 500.000 $

conclusion:

500.000 $ for some mouse clicks?

seems second market costumer are too rich, 500.000$ not worth the 5 mouse clicks.

I don't think this will work.  If you buy BIT you have a min 12 month holding period, then or now.

[chriswilmer]

Hey guys,

So I understand how shares are added to the BIT / GBTC... but is there any mechanism for removing/destroying shares (and simultaneously taking bitcoins out of the BIT's reserve)? There must be some kind of mechanism like this right?

[thezerg]

350 $ x 5000 btc = 1.750.000 $

240 $ x 5000 btc = 1.200.000 $

lets say all fees together are 10% (they are less)

--> 1.750 M $ - 1.250 M $ = 550.000 $

--> 550.000 x 0.9 = 500.000 $

conclusion:

500.000 $ for some mouse clicks?

seems second market costumer are too rich, 500.000$ not worth the 5 mouse clicks.

I don't think this will work.  If you buy BIT you have a min 12 month holding period, then or now.

The point is that an existing BIT holder could scoop up this arbitrage if he was willing to commit to another 12 month holding period.

[Peter R]

Hey guys,

So I understand how shares are added to the BIT / GBTC... but is there any mechanism for removing/destroying shares (and simultaneously taking bitcoins out of the BIT's reserve)? There must be some kind of mechanism like this right?

I'd like clarification on this point as well.  Here's what I dug up from pages 31 -32 of the GBTC 2014 Annual Report:

Creation and Redemption of Shares

The Trust creates and redeems the Shares on a continuous basis, but only upon the order of Authorized Participants and only in Baskets. A Basket is a block of 100 Shares. Initially, each Share represented 1/10th of a bitcoin.

The creation and redemption of Baskets requires the delivery to the Trust or the distribution by the Trust of the number of bitcoins represented by the Baskets being created or redeemed. The number of bitcoins that will be required (“Basket Bitcoin Amount”) for each creation basket (“Creation Basket”) or redemption basket (“Redemption Basket”) will be determined from time to time by dividing the number of bitcoins owned by the Trust at such time by the number of Shares outstanding at such time (calculated to one one-hundred-millionth of one bitcoin) and multiplying the quotient obtained by 100. The Basket Bitcoin Amount may gradually decrease over time if the Trust’s bitcoins are used to pay the Trust’s expenses.

Authorized Participants are the only persons that may place orders to create and redeem Baskets. Each Authorized Participant (i) is a registered broker-dealer, (ii) has entered into a Participant Agreement with the Sponsor and the Trust, and (iii) has access to an Authorized Participant Self-Administered Account (as defined herein). The Participant Agreement provides the procedures for the creation and redemption of Baskets and for the delivery of bitcoins required for creations and redemptions. A list of the current Authorized Participants can be obtained from the Sponsor. The Participant Agreements may be amended by the Sponsor and the relevant Authorized Participant.

Authorized Participants who make deposits of bitcoins with the Trust in exchange for Creation Baskets receive no fees, commissions or other form of compensation or inducement of any kind from either the Sponsor or the Trust. No Authorized Participant has any obligation or responsibility to the Sponsor or the Trust to affect any sale or resale of Shares. Authorized Participants may realize significant profits buying, selling, creating and redeeming Shares as a result of changes in the value of Shares or bitcoins. In particular, an Authorized Participant may profit from the “spread” (or difference) between the prices at which it purchases and sells Shares and bitcoins (or obtains Shares or bitcoins through the creation and redemption of Baskets). For example, when creating Shares, an Authorized Participant may deposit bitcoins with the Trust that it has acquired at a price that is lower than the current Bitcoin Market Price and thus receive Shares with a value greater than the Authorized Participant’s cost of acquiring the deposited bitcoins. Similarly, an Authorized Participant may sell Shares to a customer from its inventory at a price higher than the Authorized Participant’s cost in acquiring such Shares. As another example, when redeeming Shares, an Authorized Participant may receive bitcoins and then hold them for later resale at a profit if the price of bitcoins increases. The frequent and significant fluctuations in the price of bitcoins increases the extent to which an Authorized Participant may profit from its transactions in Shares and bitcoins. As of the date of this Annual Report, the only Authorized Participant is SecondMarket, Inc., an affiliate of the Sponsor.

Each Authorized Participant will be registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, and will be regulated by the Financial Industry Regulatory Authority, Inc., or, and will be qualified to act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires. Certain Authorized Participants may be regulated under federal and state banking laws and regulations. Each Authorized Participant will have its own set of rules and procedures, internal controls and information barriers as it determines to be appropriate in light of its own regulatory regime.

Authorized Participants may act for their own accounts or as agents for customers. As of the date of this Annual Report, SecondMarket, Inc. has signed a Participant Agreement with the Sponsor and the Trust and may create and redeem Baskets.

I find this confusing because it sounds like the authorized participants (Second Market is presently the only one) should be able to arbitrage the price difference already (which is different from the idea that all new shares must sit "dormant" for a year). 

[mmortal03]

350 $ x 5000 btc = 1.750.000 $

240 $ x 5000 btc = 1.200.000 $

lets say all fees together are 10% (they are less)

--> 1.750 M $ - 1.250 M $ = 550.000 $

--> 550.000 x 0.9 = 500.000 $

conclusion:

500.000 $ for some mouse clicks?

seems second market costumer are too rich, 500.000$ not worth the 5 mouse clicks.

I don't think this will work.  If you buy BIT you have a min 12 month holding period, then or now.

The point is that an existing BIT holder could scoop up this arbitrage if he was willing to commit to another 12 month holding period.

I thought that the 12 month holding period is only for the introduction of new shares.

[JorgeStolfi]

The number of bitcoins that will be required (“Basket Bitcoin Amount”) for each creation basket or redemption basket  will be determined from time to time by dividing the number of bitcoins owned by the Trust at such time by the number of Shares outstanding at such time and multiplying the quotient obtained by 100. The Basket Bitcoin Amount may gradually decrease over time if the Trust’s bitcoins are used to pay the Trust’s expenses.

I find this confusing because it sounds like the authorized participants (Second Market is presently the only one) should be able to arbitrage the price difference already (which is different from the idea that all new shares must sit "dormant" for a year). 

When the Authorized Participant (AP) redeems 100 shares, he gets 10 BTC minus whatever "expenses" the Trust had.  So this is worth doing only if the AP bought the shares from some shareholder for less than the price of 10 BTC.  Those shares must have been issued a year earlier or more, but the AP may have bought them yesterday.

Conversely, in order to get 100 new shares issued by Greyscale, the AP must give Greyscale 10 BTC.  That is only worth doing if the AP can sell those shares for more than the market price of 10 BTC.  However, my understanding is that the AB must wait a year before selling them.  (Or is the guy who buys from the AP who has to wait?)

[arivar]

Does anyone know how long it take to receive the cash after you sell your matured shares ?

[ensurance982]

Does anyone know how long it take to receive the cash after you sell your matured shares ?

I believe people in another thread suggested something along the lines of 4 days or so. This could bring us some more money from people selling their shares, and re-buying on the open market a few days later. The only problem with this is, that the volume still isn't really high enough for this to matter!

[Peter R]

When the Authorized Participant (AP) redeems 100 shares, he gets 10 BTC minus whatever "expenses" the Trust had.  So this is worth doing only if the AP bought the shares from some shareholder for less than the price of 10 BTC. 

Agreed.

Conversely, in order to get 100 new shares issued by Greyscale, the AP must give Greyscale 10 BTC.  That is only worth doing if the AP can sell those shares for more than the market price of 10 BTC.

Agreed.

However, my understanding is that the [AP] must wait a year before selling them.  (Or is the guy who buys from the AP who has to wait?)

Here's what I can find in the GBTC Annual Report (p. 63) about the one-year holding period:

Furthermore, at this time, the Sponsor is not accepting redemption requests from Shareholders. As such, until an active secondary market develops, and a holder has held its Shares for at least one year, or the Trust is permitted to, and does, reinstate a Share redemption program, investors will be unable to (or could be significantly impeded in attempting to) sell or otherwise liquidate investments in the Shares, which could have a material adverse impact on an investment in the Shares.

I understand this to mean shareholders can't presently redeem their shares for bitcoins (or cash) through the trust (but that might change).  To exit their position, they must wait a year and then sell on the OTC market. 

But I'm still unclear on what happens if the AP [Second Market] converts a basket of bitcoins into a basket of shares.  Are we sure the same time restriction applies to the AP?  It would seem the answer is "yes" otherwise I'd expect Second Market to be taking advantage of the arbitrage opportunity. 

[arivar]

Does anyone know how long it take to receive the cash after you sell your matured shares ?

I believe people in another thread suggested something along the lines of 4 days or so. This could bring us some more money from people selling their shares, and re-buying on the open market a few days later. The only problem with this is, that the volume still isn't really high enough for this to matter!

Well, a few hundreds btc on the bid daily will be very welcome. Probably the volume is going to increase day by day.

[ensurance982]

Does anyone know how long it take to receive the cash after you sell your matured shares ?

I believe people in another thread suggested something along the lines of 4 days or so. This could bring us some more money from people selling their shares, and re-buying on the open market a few days later. The only problem with this is, that the volume still isn't really high enough for this to matter!

Well, a few hundreds btc on the bid daily will be very welcome. Probably the volume is going to increase day by day.

What if all people who are eligible to sell their shares have sold them? I don't really see the volume picking up that much, to be honest. We need an ETF that's actually buying coins constantly! GBTC is very good first step, though!

[Chef Ramsay]

Does anyone know how long it take to receive the cash after you sell your matured shares ?

I believe people in another thread suggested something along the lines of 4 days or so. This could bring us some more money from people selling their shares, and re-buying on the open market a few days later. The only problem with this is, that the volume still isn't really high enough for this to matter!

Well, a few hundreds btc on the bid daily will be very welcome. Probably the volume is going to increase day by day.

What if all people who are eligible to sell their shares have sold them? I don't really see the volume picking up that much, to be honest. We need an ETF that's actually buying coins constantly! GBTC is very good first step, though!

But Barry is the one that promised another bubble for the price so I'd think his GBTC would have something to do with it.