If you own 3000 or more Bitcoin, Wall Street wants your advice

[Minor Miner]

To create the type of investment vehicle you seem to have in mind you really need btc to be traded either on a commodity exchange or (more likely in my mind) a currency exchange.   Physical gold is not backing the various gold mimicking investment vehicles, financial gold is.   There is not enough physical gold in the world to settle all the financial contracts for gold.   Bass brother squeezes do not happen anymore because there are some many financial ways to settle your obligations.
People would not pledge their coin to allow others to receive btc returns because if you read enough of these forums, you will find that people expect their fiat back or their bitcoin back based on which one is worth more.   Go read the butterfly labs thread (it may take painful days...) but you will see that buying optionality from people that do not understand what they have given up can be very dangerous (especially when it comes time to settle the trade with the physical).
I think your best bet would be to match investments with actual buys.   Should you do those buys on an "exchange"?   Likely not, but you could do block trades with miners to supplement.    You need to remember though, a lot of miners did not invest $200MM (best guess of equipment on order, not equipment in place) to mine an asset with 150 Vol because they think the value is going down.   
Just like gold miners are not paying $800 an oz for gold claims because they think the price is going back to $250.    Liquidity will always be an interesting psych thesis in btc.

[mrefish]

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 There is not enough physical gold in the world to settle all the financial contracts for gold.  
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That is counterparty risk, to big to fail quietly. The German bank is having fun unwinding their corner of this mess.

This community has tools and preferences to eliminate counterparty risk, may we never handle the backend as poorly as the physical gold community has.

[User705]

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Main things I'm wondering is how much, if at all, large BTC holders see as a value of public vehicles backed by BTC.   As suspected, for some it's no advantage at all,for others it's perceived as a major advantage.

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Curious who thinks it's a major advantage?  Current Bitcoin publicity is huge.  Short of the president buying bitcoins it's hard to think of it getting any bigger.  So publicity angle is underwhelming at best.  Ease of trading if thought through seems more of a negative because it isn't actual xbt ease of trading.  If a dentist in san diego as you put it sells apple and buys xbt fund the fact is they aren't buying xbt but instead are buying just paper.  Reminds me of MP calling it a valueless receipt.  Instead of reducing volatility it only increases it.  Instead of xbt being used as a currency it becomes a penny stock pump and dump.  Hard to see bitcoin idealists seeing this as a major thing.  I could be wrong though.

[mrefish]

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Main things I'm wondering is how much, if at all, large BTC holders see as a value of public vehicles backed by BTC.   As suspected, for some it's no advantage at all,for others it's perceived as a major advantage.

...

Curious who thinks it's a major advantage?  Current Bitcoin publicity is huge.  Short of the president buying bitcoins it's hard to think of it getting any bigger.  So publicity angle is underwhelming at best.  Ease of trading if thought through seems more of a negative because it isn't actual xbt ease of trading.  If a dentist in san diego as you put it sells apple and buys xbt fund the fact is they aren't buying xbt but instead are buying just paper.  Reminds me of MP calling it a valueless receipt.  Instead of reducing volatility it only increases it.  Instead of xbt being used as a currency it becomes a penny stock pump and dump.  Hard to see bitcoin idealists seeing this as a major thing.  I could be wrong though.

A fund should have a public bitcoin side to earn full community support. This might be difficult, but could be done in phases.

1- Bitpay for incoming funds.
2- Redemption in dollars directly to an  BTC exchange account, with some discount on fees.
3- A full Bitcoin interface in and out, difficult to get approved, but worth trying long term.
4- Full implementation in the blockchain as a BTC security, may need new laws or really clever lawyers.

[Inedible]

Recent losses on credit cards amounted to $190B - if it were that easy to trace, surely they wouldn't be losing so much would they?

Please share where you got that number.
If possible, substract the frauds by cardholders themselves, and the frauds where the thief has been caught and/or the money recovered.

For the sake of argument, let's say it's only $10B. It's still a massive amount of money to not be able to trace.

Source: http://www.forbes.com/sites/haydnshaughnessy/2011/03/24/solving-the-190-billion-annual-fraud-scam-more-on-jumio/

[DPoS]

...

Main things I'm wondering is how much, if at all, large BTC holders see as a value of public vehicles backed by BTC.   As suspected, for some it's no advantage at all,for others it's perceived as a major advantage.

...

Curious who thinks it's a major advantage?  Current Bitcoin publicity is huge.  Short of the president buying bitcoins it's hard to think of it getting any bigger.  So publicity angle is underwhelming at best.  Ease of trading if thought through seems more of a negative because it isn't actual xbt ease of trading.  If a dentist in san diego as you put it sells apple and buys xbt fund the fact is they aren't buying xbt but instead are buying just paper.  Reminds me of MP calling it a valueless receipt.  Instead of reducing volatility it only increases it.  Instead of xbt being used as a currency it becomes a penny stock pump and dump.  Hard to see bitcoin idealists seeing this as a major thing.  I could be wrong though.

there is a bunch of IRA money or crazier 401k money that someday could be blindly tossed into bitcoins..  I think OP is trying to set up something that can get through regulations for the common greater fool to come push bitcoin higher quicker.

the other ones now are only for 'sophisticated investors'...    Fidelity slipped and let the second market one go live for anyone's IRA but then took it off in a day

[mrefish]

there is a bunch of IRA money or crazier 401k money ...

The big win would be Roth IRA money, think about the tax savings on BTC  withdrawn in 2050.

[Bostonbitcoin]

...

Curious who thinks it's a major advantage?  Current Bitcoin publicity is huge.  Short of the president buying bitcoins it's hard to think of it getting any bigger.  So publicity angle is underwhelming at best.  Ease of trading if thought through seems more of a negative because it isn't actual xbt ease of trading.  If a dentist in san diego as you put it sells apple and buys xbt fund the fact is they aren't buying xbt but instead are buying just paper.  Reminds me of MP calling it a valueless receipt.  Instead of reducing volatility it only increases it.  Instead of xbt being used as a currency it becomes a penny stock pump and dump.  Hard to see bitcoin idealists seeing this as a major thing.  I could be wrong though.

there is a bunch of IRA money or crazier 401k money that someday could be blindly tossed into bitcoins..  I think OP is trying to set up something that can get through regulations for the common greater fool to come push bitcoin higher quicker.

the other ones now are only for 'sophisticated investors'...    Fidelity slipped and let the second market one go live for anyone's IRA but then took it off in a day


[/quote]


Yes exactly -- the publicity has been great but the overall actual investment in Bitcoin is still REALLY tiny compared to other financial instruments like the currency of a very tiny third world country or a moderately sized public company.

I'd like to see a vehicle where that dentist form San Diego so to speak could rally easily but a BTC based investment in a way he understands and is comfortable with.

Basic investor behavior is that people stay with what they know, what they are comfortable with.

To the point about it just being paper, not real Bitcoin -- depends on the structure.... I'm going with the REIT - Real Estate Investment Trust example because it's the closest I can do.   If I launch a $400 mm REIT for development of real estate opportunities in Boston --- and Joe Dentist buys $100,000 worth from his Charles Schwab account ....that helps Boston real estate and that 100k does go toward Boston real estate.....for this, same thing.    

A Bitcoin fund invested into by retail and institutional investors WOULD go DIRECTLY to Bitcoin --- so if we raised $100 mm then you'd see the fund staff around working to buy a heck of a lot of coins.   Now AFTER a fund like this is raised then Joe Dentist may sell his shares on Schwab to some other investor and, yes, at that stage it's just paper....but, like the Boston real estate, the Bitcoin is still owned and held....adding stability and improving price.....also bringing even more notice, ease etc to the space.

If Bitcoin grows the way it hopefully will, then it seems likely there will be several vehicles like this which could collectively add a good amount of money to BTC as well as some stability.

[Bostonbitcoin]

there is a bunch of IRA money or crazier 401k money ...

The big win would be Roth IRA money, think about the tax savings on BTC  withdrawn in 2050.

Definitely....these kinds of mainstream vehicles have the capability of significantly increasing the overall size of Bitcoin market cap.



    (I know "market cap" isn't the best measurement)

[User705]

Isn't one able to do Roth IRA right now with casascius coins or is it limited to bullion pm coins?

[Bostonbitcoin]

Isn't one able to do Roth IRA right now with casascius coins or is it limited to bullion pm coins?

Casascius coins are likely considered a collectable and while IRS regs and the tax code theoretically allow collectables in an IRA, the practical matter of actually doing so is much more difficult.

For an IRA to be considered real and recognized by the IRS it must be confirmed to be compliant.   Major custodians like Fidelity, UBS etc. have no problem at all getting the plans considered to be complaint....but there are almost no major custodians who can take non standard assets like this.

So....you'd be looking at either a high end very specialized solution done through a law firm or family office....usually something focused on investors with over $50 mm......or you'd be looking at getting your own custom IRA to be considered compliant.   

Both are hard paths.

Ideal solution for Bitcoin is something which is on an exchange and requires no special approval....one on the exchange ANY IRA which has access to stocks could buy it very easily.

[mrefish]

Security will be a major issue but no more of an issue than for electronic banking.

Are you kidding ?

In "electronic banking" there is almost no way anyone can steal significant amount of money without being caught and the money recovered.

I agree with ghdp.

I was at a $20 bn boutique fund the other day talking BTC with the owners -- I looked around the office and noted that there really isn't anything anyone could steal.   If a criminal walked in you could give him free reign -- what could he take?  Client lists? 

If he was REALLY clever he could figure out where to wore money....then what?  He'd need to have a wire to a bank where he could wore it to

Found a case where bank security failed destroying a California escrow company.

http://krebsonsecurity.com/2014/01/firm-bankrupted-by-cyberheist-sues-bank/

"$1.1 million to accounts in the Heilongjiang Province of China"

[mrefish]

Another method for the list, available today in the UK: CFD(contract for difference) at EToro.

http://www.etoro.com/blog/product-updates/13012014/bitcoin-arrived/

"Bitcoin has arrived!"

[jzcjca00]

Isn't one able to do Roth IRA right now with casascius coins or is it limited to bullion pm coins?

Casascius coins are likely considered a collectable and while IRS regs and the tax code theoretically allow collectables in an IRA, the practical matter of actually doing so is much more difficult.

For an IRA to be considered real and recognized by the IRS it must be confirmed to be compliant.   Major custodians like Fidelity, UBS etc. have no problem at all getting the plans considered to be complaint....but there are almost no major custodians who can take non standard assets like this.

So....you'd be looking at either a high end very specialized solution done through a law firm or family office....usually something focused on investors with over $50 mm......or you'd be looking at getting your own custom IRA to be considered compliant.   

Both are hard paths.

Ideal solution for Bitcoin is something which is on an exchange and requires no special approval....one on the exchange ANY IRA which has access to stocks could buy it very easily.

It's not nearly as hard to own bitcoins in an IRA as this post suggests.  For about $1,500 and a small amount of effort, you can have a company like Broad Financial set up an IRA LLC for you, which allows you to invest IRA funds directly in bitcoins or a wide variety of other investments.

You cannot invest in Casascius coins, because the IRS rules specifically prohibit investing in collectibles, and they specifically say that coins, other than a certain few specific silver, gold, and platinum ones, are considered collectibles.  Since Casascius coins are physical coins, they are disallowed.

However, normal bitcoins are not actually coins ("a flat, typically round piece of metal with an official stamp, used as money"), so they are allowed.

Yes, it will be easier once there is an ETF, but how long will we have to wait for that to happen?  And how much will the price rise in anticipation of the launch of the ETF once it is approved?

If the bitcoin keeps going up, you can save a considerable amount in capital gains taxes by investing in bitcoins inside a Roth IRA LLC today.

Details at https://bitcointalk.org/index.php?topic=396783.0.

[mrefish]

Interesting notes on Second Market  in Forbes' Silk Road auction story.

"10-person team which spends most of its time doing Bitcoin sourcing, “banging down doors and networking.”

That's more guys than I would have guessed, they are trying to avoid exchanges; might even be paying more to do that.

http://www.forbes.com/sites/kashmirhill/2014/01/16/the-feds-are-ready-to-sell-the-silk-road-bitcoin-kind-of/

[DPoS]

coinbase crimping the inflow from instant 10btc/week to 1btc/week is major

basically if you don't already have coins, using bitcoins on overstock is like reverse layaway plan for anything over $80 right now.. and that is all you can spend for a whole week!

the floor is out of the public's hands and that is what wall street wants no doubt...  insiders hold the cards even more than they ever did

so just buy your ticket and watch the show and not think you are part of the action

[Bostonbitcoin]

It's not nearly as hard to own bitcoins in an IRA as this post suggests.  For about $1,500 and a small amount of effort, you can have a company like Broad Financial set up an IRA LLC for you, which allows you to invest IRA funds directly in bitcoins or a wide variety of other investments.

I'd be super cautious of the Broad Financial option....there are many similar companies which have come and gone....it's not easy to research them to get a comfort level with thier quality...The site doesn't even have much info about the company.

I've seen hundreds of people try this but never actually seen it work for anyone.

The challenge lies in the actual implementation.   Sure anyone can follow IRS regs and set up a compliance LLC to be invested in an IRA....but the actual implementation is the killer.    Who is the custodian?  Who does the accounting?  How do you segregate bitcoins out?

I might be wrong but I've never, ever seen it work for anyone other than the ultra rich through specialized family offices.

There is a HUGE market for these kinds of fully self directed IRAs for people to buy real estate etc. -- the reason NO major firm (like Fidelity, Schwab or Merrill) has ever done one is because NONE have been able to figure out how to do it.   It would be a huge profit area for any firm who did so.   I don't trust the small companies who say they have figured it out.

[jzcjca00]

It's not nearly as hard to own bitcoins in an IRA as this post suggests.  For about $1,500 and a small amount of effort, you can have a company like Broad Financial set up an IRA LLC for you, which allows you to invest IRA funds directly in bitcoins or a wide variety of other investments.

I'd be super cautious of the Broad Financial option....there are many similar companies which have come and gone....it's not easy to research them to get a comfort level with thier quality...The site doesn't even have much info about the company.

I've seen hundreds of people try this but never actually seen it work for anyone.

The challenge lies in the actual implementation.   Sure anyone can follow IRS regs and set up a compliance LLC to be invested in an IRA....but the actual implementation is the killer.    Who is the custodian?  Who does the accounting?  How do you segregate bitcoins out?

I might be wrong but I've never, ever seen it work for anyone other than the ultra rich through specialized family offices.

There is a HUGE market for these kinds of fully self directed IRAs for people to buy real estate etc. -- the reason NO major firm (like Fidelity, Schwab or Merrill) has ever done one is because NONE have been able to figure out how to do it.   It would be a huge profit area for any firm who did so.   I don't trust the small companies who say they have figured it out.

The big companies like Fidelity, Schwab or Merrill make huge money on trade commissions and mutual fund fees.  There is not much profit in being an IRA custodian of an account with only one holding, an IRA LLC, so there is no incentive for them to get into the business.  They want you holding stocks and mutual funds.

We know that tens of thousands of people are doing self-directed IRAs for real estate, and the IRS has removed this from the list of activities likely to trigger an audit.

One commonly used custodian is IRA Services Trust Company.

I don't yet know how much work this will be, and I can't yet say whether it will trigger an audit.  I just think that shielding bitcoins from capital gains taxes sounds like a good idea.  I'll know more in a year or two, but how much will bitcoins appreciate during that time?  What will it cost people to wait?

I'm an early adopter, and that brings some risks!