Winklevoss Bitcoin ETF effect in price

[vuduchyld]

I don't know jack about traditional Wall Street mumbo jumbo, but I read today that the Winky ETF is modeled after the GLD fund – which set records by attracting over a $billion in new investment in just 3 days. Obviously that's a pretty lazy comparison, but consider this: Bitcoin represents an entirely new asset class. Lots of institutions and investors will want to get in on this on the ground floor, whether they support or even understand virtual currencies at all. Once the general public sees how much easy money can be made, money will start pouring in. IMO the ETF is the next big step for bitcoin and it will likely be the spark for the next bubble...

If $1 billion came in the first 3 days of the COIN, how many bitcoins would have to be purchased on the market?

I could be wrong, but I remember reading that there was something like a 1:5 leverage ratio, so divided by $620 (price today) and divided by 5, it's about 307,000 coins.

Another way to look at it would just be to take $1 billion divided by the 12,000,000 mined coins and that comes to about $83 per coin.  

Or that the current market capitalization would be about $8 billion, so you're adding 12.5%.  It probably ain't the moon.  And that's not even considering whether or not a bitcoin ETF would be as attractive as gold, which it might well not be.

I'd welcome it, but I don't think it's going to pay for my daughter's college or anything.

Well, its not a 5 to 1 leverage ratio. 5 shares = 1 Bitcoin.

So lets redo that math, shall we??

The fund already has 100,000 btc. So if 1 billion came in, the first 100k btc (@ $620) would equal $62 million.

So that would leave an additional $938 MILLION worth of bitcoins that would need to be purchased.

You still think that would not effect the price in a substantial way?

PS. You realize that $1 billion in INVESTMENT capital is a completely different beast than 1/8 increase in market capitalization. Right?

Oh, I see.  I re-read the article and you are correct on the 5 shares = 1 bitcoin.  I suppose they want to target an ETF price that is lower than the price of bitcoin.

Still, $938,000,000 divided by 12,000,000 mined coins (factoring in their 100,000 bitcoin stash which accounts for $62 million--again, you're correct about a fact that I hadn't included) gets you to $78.

Could it drive the price up a LOT further due to market factors?  Sure...absolutely, in part, because, as you say, $1 billion of incoming investment operates a lot differently than just adding that $1 billion equitably in market capital.  Especially when you factor in that about 1000 people own about 50% of the mined bitcoins, the available float becomes more scarce if the 1000 are all hodling.  It could drive the price up considerably if there are only, say, 2 million coins that aren't being hodled no matter what.

But there are a lot of what ifs.  What if the 1000 decide that a big influx of investment capital represents the perfect time for them to cash out without destroying the value?  What if the bitcoin ETF doesn't attract $1 billion, but more like $200 million?  The Winklevii have about 1/3 of that covered already, so you're only talking about a demand of 200,000 bitcoins. 

This probably isn't very scientific, but I just pulled up the weekly chart and looked at the last 3 weeks I could find with 200K volumes.  One was an
up week and two were down weeks.  Might see a 20% change...might not. 

Don't get me wrong...I think it's a great thing for a variety of reasons.  A short term bump of some sort is one of them.  Keep in mind, also, that the bump will likely be spread out a little bit...won't hit on the day the ETF opens.  More liquidity is helpful long term.  I just don't see this as a moon shot. Could it be 20-25%?  Sure.  Could be a little more.  Could be a little less.

[Ibian]

Say their initial stash gets bought out and they need more. How will they get it? Can they just do some market orders and set their own price a bit higher? Do they have any reason not to do it like that? After all, they are buying for other peoples money and probably getting a cut.

[windjc]

I don't know jack about traditional Wall Street mumbo jumbo, but I read today that the Winky ETF is modeled after the GLD fund – which set records by attracting over a $billion in new investment in just 3 days. Obviously that's a pretty lazy comparison, but consider this: Bitcoin represents an entirely new asset class. Lots of institutions and investors will want to get in on this on the ground floor, whether they support or even understand virtual currencies at all. Once the general public sees how much easy money can be made, money will start pouring in. IMO the ETF is the next big step for bitcoin and it will likely be the spark for the next bubble...

If $1 billion came in the first 3 days of the COIN, how many bitcoins would have to be purchased on the market?

I could be wrong, but I remember reading that there was something like a 1:5 leverage ratio, so divided by $620 (price today) and divided by 5, it's about 307,000 coins.

Another way to look at it would just be to take $1 billion divided by the 12,000,000 mined coins and that comes to about $83 per coin.  

Or that the current market capitalization would be about $8 billion, so you're adding 12.5%.  It probably ain't the moon.  And that's not even considering whether or not a bitcoin ETF would be as attractive as gold, which it might well not be.

I'd welcome it, but I don't think it's going to pay for my daughter's college or anything.

Well, its not a 5 to 1 leverage ratio. 5 shares = 1 Bitcoin.

So lets redo that math, shall we??

The fund already has 100,000 btc. So if 1 billion came in, the first 100k btc (@ $620) would equal $62 million.

So that would leave an additional $938 MILLION worth of bitcoins that would need to be purchased.

You still think that would not effect the price in a substantial way?

PS. You realize that $1 billion in INVESTMENT capital is a completely different beast than 1/8 increase in market capitalization. Right?

Oh, I see.  I re-read the article and you are correct on the 5 shares = 1 bitcoin.  I suppose they want to target an ETF price that is lower than the price of bitcoin.

Still, $938,000,000 divided by 12,000,000 mined coins (factoring in their 100,000 bitcoin stash which accounts for $62 million--again, you're correct about a fact that I hadn't included) gets you to $78.

Could it drive the price up a LOT further due to market factors?  Sure...absolutely, in part, because, as you say, $1 billion of incoming investment operates a lot differently than just adding that $1 billion equitably in market capital.  Especially when you factor in that about 1000 people own about 50% of the mined bitcoins, the available float becomes more scarce if the 1000 are all hodling.  It could drive the price up considerably if there are only, say, 2 million coins that aren't being hodled no matter what.

But there are a lot of what ifs.  What if the 1000 decide that a big influx of investment capital represents the perfect time for them to cash out without destroying the value?  What if the bitcoin ETF doesn't attract $1 billion, but more like $200 million?  The Winklevii have about 1/3 of that covered already, so you're only talking about a demand of 200,000 bitcoins. 

This probably isn't very scientific, but I just pulled up the weekly chart and looked at the last 3 weeks I could find with 200K volumes.  One was an
up week and two were down weeks.  Might see a 20% change...might not. 

Don't get me wrong...I think it's a great thing for a variety of reasons.  A short term bump of some sort is one of them.  Keep in mind, also, that the bump will likely be spread out a little bit...won't hit on the day the ETF opens.  More liquidity is helpful long term.  I just don't see this as a moon shot. Could it be 20-25%?  Sure.  Could be a little more.  Could be a little less.

 
Let's split the difference and say they need to buy 500 million worth. Where do they buy them? Someone's going to sell for 800$? No. They have to go to exchanges and that's going to be another bubble.

[vuduchyld]

I don't know jack about traditional Wall Street mumbo jumbo, but I read today that the Winky ETF is modeled after the GLD fund – which set records by attracting over a $billion in new investment in just 3 days. Obviously that's a pretty lazy comparison, but consider this: Bitcoin represents an entirely new asset class. Lots of institutions and investors will want to get in on this on the ground floor, whether they support or even understand virtual currencies at all. Once the general public sees how much easy money can be made, money will start pouring in. IMO the ETF is the next big step for bitcoin and it will likely be the spark for the next bubble...

If $1 billion came in the first 3 days of the COIN, how many bitcoins would have to be purchased on the market?

I could be wrong, but I remember reading that there was something like a 1:5 leverage ratio, so divided by $620 (price today) and divided by 5, it's about 307,000 coins.

Another way to look at it would just be to take $1 billion divided by the 12,000,000 mined coins and that comes to about $83 per coin.  

Or that the current market capitalization would be about $8 billion, so you're adding 12.5%.  It probably ain't the moon.  And that's not even considering whether or not a bitcoin ETF would be as attractive as gold, which it might well not be.

I'd welcome it, but I don't think it's going to pay for my daughter's college or anything.

Well, its not a 5 to 1 leverage ratio. 5 shares = 1 Bitcoin.

So lets redo that math, shall we??

The fund already has 100,000 btc. So if 1 billion came in, the first 100k btc (@ $620) would equal $62 million.

So that would leave an additional $938 MILLION worth of bitcoins that would need to be purchased.

You still think that would not effect the price in a substantial way?

PS. You realize that $1 billion in INVESTMENT capital is a completely different beast than 1/8 increase in market capitalization. Right?

Oh, I see.  I re-read the article and you are correct on the 5 shares = 1 bitcoin.  I suppose they want to target an ETF price that is lower than the price of bitcoin.

Still, $938,000,000 divided by 12,000,000 mined coins (factoring in their 100,000 bitcoin stash which accounts for $62 million--again, you're correct about a fact that I hadn't included) gets you to $78.

Could it drive the price up a LOT further due to market factors?  Sure...absolutely, in part, because, as you say, $1 billion of incoming investment operates a lot differently than just adding that $1 billion equitably in market capital.  Especially when you factor in that about 1000 people own about 50% of the mined bitcoins, the available float becomes more scarce if the 1000 are all hodling.  It could drive the price up considerably if there are only, say, 2 million coins that aren't being hodled no matter what.

But there are a lot of what ifs.  What if the 1000 decide that a big influx of investment capital represents the perfect time for them to cash out without destroying the value?  What if the bitcoin ETF doesn't attract $1 billion, but more like $200 million?  The Winklevii have about 1/3 of that covered already, so you're only talking about a demand of 200,000 bitcoins. 

This probably isn't very scientific, but I just pulled up the weekly chart and looked at the last 3 weeks I could find with 200K volumes.  One was an
up week and two were down weeks.  Might see a 20% change...might not. 

Don't get me wrong...I think it's a great thing for a variety of reasons.  A short term bump of some sort is one of them.  Keep in mind, also, that the bump will likely be spread out a little bit...won't hit on the day the ETF opens.  More liquidity is helpful long term.  I just don't see this as a moon shot. Could it be 20-25%?  Sure.  Could be a little more.  Could be a little less.

 
Let's split the difference and say they need to buy 500 million worth. Where do they buy them? Someone's going to sell for 800$? No. They have to go to exchanges and that's going to be another bubble.

Could happen. I kind of doubt it, but i might be hoping instead of predicting.  Maybe an even better scenario would be a more sustained influx of capital...it starts at $200 mil, which raises the price, which attracts more capital, which raises the price, which attracts even more...and that sustains over a period of time.  That might be better than $500 mil or $1 bil that causes a bubble, which attracts the shorts and bubble pokers.

[Jimboo]

Hi guys, this is the first time ever in my life that I will post anything on the internet, but I think you'll get the point.

I think bitcoin is due to an amazing future and that we should get people to think in smaller denominations than a full bitcoin unit. By analogy to our current fiat currencies like $ or euro I'm sure you'll agree that the most easily used subdenomination of the bitcoin should be the milli-bitcoin.
I think that the psychologically extremely high price of the most used bitcoin denomination (the unit) will slow its acceptance until "named" subunits are used more regularly, I would guess our visual system also plays its role because i start to have problems counting the number of zeroes after the comma you need to be able to buy a damn coffee in our beloved currency.

This is my request: Please please, do not divide the value of one bitcoin by 5... FIVE to get one damn sharee of COIN ETF!! Divide it by 1000, 1000000 whatever you want, but please let people get used to think in smaller NAMED (mBTC) bitcoin denominations, not in new base5 base8 or whatever system that doesnt have even a name! We need to get used to a higher bitcoin value, please help us do that...

1 COIN share = 1mBTC is all we should ask for

[Benjig]

Hi guys, this is the first time ever in my life that I will post anything on the internet, but I think you'll get the point.

I think bitcoin is due to an amazing future and that we should get people to think in smaller denominations than a full bitcoin unit. By analogy to our current fiat currencies like $ or euro I'm sure you'll agree that the most easily used subdenomination of the bitcoin should be the milli-bitcoin.
I think that the psychologically extremely high price of the most used bitcoin denomination (the unit) will slow its acceptance until "named" subunits are used more regularly, I would guess our visual system also plays its role because i start to have problems counting the number of zeroes after the comma you need to be able to buy a damn coffee in our beloved currency.

This is my request: Please please, do not divide the value of one bitcoin by 5... FIVE to get one damn sharee of COIN ETF!! Divide it by 1000, 1000000 whatever you want, but please let people get used to think in smaller NAMED (mBTC) bitcoin denominations, not in new base5 base8 or whatever system that doesnt have even a name! We need to get used to a higher bitcoin value, please help us do that...

1 COIN share = 1mBTC is all we should ask for

Well that price was set probably when bitcoin was not as high in price as its now, anyway 1mBTC= 1 coin share is extreme low, it would be good perhaps, 1 share = 0.05 or 0.01, but less than a dollar share for a wall street asset is ridiculous.

[theonewhowaskazu]

ETFs do splits and reverse splits all the frickin time. They'll probably just do a 20 to 1 split during next bubble, when bitcoin goes up to $4000-$5000.

[Erdogan]

ETFs do splits and reverse splits all the frickin time. They'll probably just do a 20 to 1 split during next bubble, when bitcoin goes up to $4000-$5000.

There must be some stickiness going on. Do they not know that we have invented a practically inifitive divisiveness in bitcoin? At this stage in the development in the human kind, we have parted from the evil of fixedsharesizeness.

[wachtwoord]

But 5:1 for the start was indeed quite retarded.

[Erdogan]

The ETF is an extension of bitcoin, hampered by a confusing share size, with a market that is open maybe 40 hours in a week of 168 hours, with a liquidity somewhat reduced from the liquidity of 1 in bitcoin itself, with extra cost attached for holding, and an invitation to the taxman.

It's a free market, so come on with everything you have, but for me, I think I will just stick with the coins.
 

[Harley997]

But 5:1 for the start was indeed quite retarded.

Making one share of COIN worth 1/5 of 1 BTC is a good idea. If the price of the ETF is too high then it will turn off too many retail investors as it would be difficult for them to purchase whole shares of the ETF.

[BitchicksHusband]

The ETF is an extension of bitcoin, hampered by a confusing share size, with a market that is open maybe 40 hours in a week of 168 hours, with a liquidity somewhat reduced from the liquidity of 1 in bitcoin itself, with extra cost attached for holding, and an invitation to the taxman.

It's a free market, so come on with everything you have, but for me, I think I will just stick with the coins.
 

Let's say for the sake of argument I have $100,000 in my self-directed IRAs.  That's $100,000 that by law I am not allowed to invest in bitcoin.

When the ETF hits, I can invest it.  Right now, I can't.

Let's say Fidelity or Vanguard wants to add bitcoin to one of their mutual funds.  Right now, they can't.

Do you see that this changes things drastically in the US.

[Erdogan]

The ETF is an extension of bitcoin, hampered by a confusing share size, with a market that is open maybe 40 hours in a week of 168 hours, with a liquidity somewhat reduced from the liquidity of 1 in bitcoin itself, with extra cost attached for holding, and an invitation to the taxman.

It's a free market, so come on with everything you have, but for me, I think I will just stick with the coins.
 

Let's say for the sake of argument I have $100,000 in my self-directed IRAs.  That's $100,000 that by law I am not allowed to invest in bitcoin.

When the ETF hits, I can invest it.  Right now, I can't.

Let's say Fidelity or Vanguard wants to add bitcoin to one of their mutual funds.  Right now, they can't.

Do you see that this changes things drastically in the US.

That I can understand.

[BTCtrader71]

Let's say for the sake of argument I have $100,000 in my self-directed IRAs.  That's $100,000 that by law I am not allowed to invest in bitcoin.

When the ETF hits, I can invest it.  Right now, I can't.

It is possible to invest your IRA money into bitcoin directly, using a self-directed IRA, although it is complicated. Doing so entails setting up a "self-directed IRA LLC" and using the LLC to buy bitcoin directly. Broad Financial walks you through the process:
http://www.broadfinancial.com/self-directed-ira/bitcoin-ira
However, setting this up takes quite a bit of time and effort. And it costs money. And there are differing legal opinions about whether or not the existing rules even allow for self-directed IRA LLCs.
 

Do you see that this changes things drastically in the US.

The ETF does in fact change things drastically in the US. Not just for IRAs, but also for regular investment portfolios. Most regular investors, and an even larger percentage of professional investment account managers, simply won't even think about an investment that hasn't been blessed by the powers that be.

[theonewhowaskazu]

Let's say for the sake of argument I have $100,000 in my self-directed IRAs.  That's $100,000 that by law I am not allowed to invest in bitcoin.

When the ETF hits, I can invest it.  Right now, I can't.

It is possible to invest your IRA money into bitcoin directly, using a self-directed IRA, although it is complicated. Doing so entails setting up a "self-directed IRA LLC" and using the LLC to buy bitcoin directly. Broad Financial walks you through the process:
http://www.broadfinancial.com/self-directed-ira/bitcoin-ira
However, setting this up takes quite a bit of time and effort. And it costs money. And there are differing legal opinions about whether or not the existing rules even allow for self-directed IRA LLCs.
 

Do you see that this changes things drastically in the US.

The ETF does in fact change things drastically in the US. Not just for IRAs, but also for regular investment portfolios. Most regular investors, and an even larger percentage of professional investment account managers, simply won't even think about an investment that hasn't been blessed by the powers that be.

I hardly think this counts as "blessed". I think it more counts as "grudging acceptance." Still, its an improvements.

[BTCtrader71]

Let's say for the sake of argument I have $100,000 in my self-directed IRAs.  That's $100,000 that by law I am not allowed to invest in bitcoin.

When the ETF hits, I can invest it.  Right now, I can't.

It is possible to invest your IRA money into bitcoin directly, using a self-directed IRA, although it is complicated. Doing so entails setting up a "self-directed IRA LLC" and using the LLC to buy bitcoin directly. Broad Financial walks you through the process:
http://www.broadfinancial.com/self-directed-ira/bitcoin-ira
However, setting this up takes quite a bit of time and effort. And it costs money. And there are differing legal opinions about whether or not the existing rules even allow for self-directed IRA LLCs.
 

Do you see that this changes things drastically in the US.

The ETF does in fact change things drastically in the US. Not just for IRAs, but also for regular investment portfolios. Most regular investors, and an even larger percentage of professional investment account managers, simply won't even think about an investment that hasn't been blessed by the powers that be.

I hardly think this counts as "blessed". I think it more counts as "grudging acceptance." Still, its an improvements.

Point well taken. There are large investment pools that probably still won't touch bitcoin until it's been blessed a few more methods, by which time a few more bubbles will have gone by. Large banks, for example, with all that fiat that they have stored with the Fed that they don't know what to do with.