Gold collapsing. Bitcoin UP.

[rocks]

I see thanks, so you can buy shares with bitcoins then. When you sell do you get bitcoins back or fiat? Is there an official statement about this?

Only the "authorized participants" (APs) can.  But as long as there's a few competing APs, that's all that's actually required to ensure that NAV tracks the underlying (because they're all competing for a small guaranteed arbitrage profit).  

Is there an official statement about this?

Yes, it's all written up in the SEC documents the Winklevoss's filed (or just google how ETFs work in general).  

ok cool so these APs are acting as market peg bots essentially guiding the price.. wonder if it holds long term... I guess GLD / SLV are examples of something that has been working. So we can then draw some correlation to the actual bitcoin price once massive volume steps in thru COIN, however we all know the kind of manipulation that will ensue once we are up there in the clouds!

My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.

With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)

With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...

[1714150230]

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[1714150230]

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[1714150230]

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[sidhujag]

I see thanks, so you can buy shares with bitcoins then. When you sell do you get bitcoins back or fiat? Is there an official statement about this?

Only the "authorized participants" (APs) can.  But as long as there's a few competing APs, that's all that's actually required to ensure that NAV tracks the underlying (because they're all competing for a small guaranteed arbitrage profit).  

Is there an official statement about this?

Yes, it's all written up in the SEC documents the Winklevoss's filed (or just google how ETFs work in general).  

ok cool so these APs are acting as market peg bots essentially guiding the price.. wonder if it holds long term... I guess GLD / SLV are examples of something that has been working. So we can then draw some correlation to the actual bitcoin price once massive volume steps in thru COIN, however we all know the kind of manipulation that will ensue once we are up there in the clouds!

My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.

With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)

With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...

If settlement is done via BTC this is bullish and best case scenario IMO because any volume input will count as aggregate volume towards the buy side. The initial volume will be all bullish.

[tabnloz]

I see thanks, so you can buy shares with bitcoins then. When you sell do you get bitcoins back or fiat? Is there an official statement about this?

Only the "authorized participants" (APs) can.  But as long as there's a few competing APs, that's all that's actually required to ensure that NAV tracks the underlying (because they're all competing for a small guaranteed arbitrage profit).  

Is there an official statement about this?

Yes, it's all written up in the SEC documents the Winklevoss's filed (or just google how ETFs work in general).  

ok cool so these APs are acting as market peg bots essentially guiding the price.. wonder if it holds long term... I guess GLD / SLV are examples of something that has been working. So we can then draw some correlation to the actual bitcoin price once massive volume steps in thru COIN, however we all know the kind of manipulation that will ensue once we are up there in the clouds!

My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.

With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)

With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...

If settlement is done via BTC this is bullish and best case scenario IMO because any volume input will count as aggregate volume towards the buy side. The initial volume will be all bullish.

Thanks for the explanation. Seems like a definite positive if it gets off the ground.

[Peter R]

My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.

With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)

With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...

What makes you think GLD doesn't hold gold bars (you mention COMEX futures)?  I agree that there's a few sketchy details, but the GLD prospectus indicates that the custodian (HSBC) is responsible for safekeeping of physical bars of gold.

[sidhujag]

My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.

With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)

With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...

What makes you think GLD doesn't hold gold bars (you mention COMEX futures)?  I agree that there's a few sketchy details, but the GLD prospectus indicates that the custodian (HSBC) is responsible for safekeeping of physical bars of gold.

The biggest ETF (GLD) is physically backed: http://etfdb.com/etf/GLD/

[rocks]

My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.

With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)

With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...

What makes you think GLD doesn't hold gold bars (you mention COMEX futures)?  I agree that there's a few sketchy details, but the GLD prospectus indicates that the custodian (HSBC) is responsible for safekeeping of physical bars of gold.

GLD does hold physical metal, but it is not 100%, it is more like 10% (at least the last time I checked). GLD will add physical bars, but the vast majority of the daily tracking process is APs buying and selling COMEX futures into / out of GLD, which make up around 90% of GLD's assets (again I'm going off of memory here).

This is why Sprott Physical Gold Trust PHYS is differentiated. PHYS holds 100% (OK something like 99%) of assets as physical bars held in the name of the trust.

[Peter R]

My understanding is the mechanics of COIN will be similar to GLD / SLV, in that it is an open ended ETF, but that is where the similarities end.

With GLD / SLV the underlying asset is quite different. With GLD/SLV you are really trading gold and silver COMEX futures , not physical gold or silver itself. The difference is since the FED and banks can create paper gold on demand and COMEX settles contracts in dollars (not real metal), then what you are really buying through GLD is a gold future that is settled in dollars. The FED can create this contract out of the air and then sell and deliver this contract in printed dollars. (This is a game that continues until the market demands physical metal)

With COIN settlement is in real BTC on the blockchain, not paper printed contracts. There are no paper printed products in Bitcoin. Our market today does not understand how to deal with a fixed supply asset like this anymore, so the only thing we can expect is lots of volatility, my personal expectation is that volatility will mostly be in one direction...

What makes you think GLD doesn't hold gold bars (you mention COMEX futures)?  I agree that there's a few sketchy details, but the GLD prospectus indicates that the custodian (HSBC) is responsible for safekeeping of physical bars of gold.

The biggest ETF (GLD) is physically backed: http://etfdb.com/etf/GLD/

Yes, that's what I'm saying.  

Here's another excerpt from the GLD prospectus:

[Peter R]

GLD does hold physical metal, but it is not 100%, it is more like 10% (at least the last time I checked). GLD will add physical bars, but the vast majority of the daily tracking process is APs buying and selling COMEX futures into / out of GLD, which make up around 90% of GLD's assets (again I'm going off of memory here).

Regardless of the precise details, you've brought up a good point: with COIN, the trust and the custodian are the same entity.  With GLD, this is not the case. 

[smooth]

COMEX settles contracts in dollars (not real metal)

This part is incorrect. Gold futures settle in gold. You can click through here to find the actual settlement procedure and rules (types of bars, delivery location, etc.).

http://www.cmegroup.com/trading/metals/precious/gold_contract_specifications.html

"Things to know about the contracts:
Physically delivered"

[sidhujag]

Although they can be physically delivered most of the time they are not... infact I tried to deal with Soft Lumber before and even got on a call with a trader in CBE and he explained that if you want physical delivery you have to flag it as such prior taking the trade.. kinda stupid if you ask me.. that you have to explicitely tell the world hey this order is for physical delivery!.. shows how far we let ourselves get with bots/arbs and quant traders. Most contracts are closed out without delivery because both sides agree, unless the guy wants physical.. then the exchange has "extra" paper work to do to sort you out.

[rocks]

OK, I'll bite. I thought I remembered reading a long time ago that a good portion of GLD's holdings were paper products and not bars. But after a quick search it seems that is incorrect and most of GLD's holdings is allocated gold with HSBC.

Still "allocated gold at HSBC" isn't going to buy you the protection associated with physical gold in a crisis, which is the whole reason to hold some gold. For example, in the MF Global blowup customers with allocated gold with specific physical bars and serial numbers in their name, lost around 28%. The "allocated gold" distinction meant nothing in the end. I have less trust in HSBC than MF Global frankly. Also, MF Global was a small fish and they did this, what do you think is going to happen to "allocated gold" in a real crisis?

http://online.barrons.com/news/articles/SB50001424052748703856804577098740322633760?mod=googlenews_wsj?mod=googlenews_barrons

I'm now trying to remember why PHYS was differentiated, or was it just a open ended vs close ended difference?

[smooth]

Most contracts are closed out without delivery because both sides agree, unless the guy wants physical.. then the exchange has "extra" paper work to do to sort you out.

This is true and it is hard to imagine how any trading market could be different. Not allowed to close out a position?

The important point is though, if you feel physical is worth more than the offered price for whatever reason, you have the option to take it.

[cypherdoc]

this is about the most bullish Bitcoin sign we could have; David Birch bullish on Ethereum:

https://twitter.com/dgwbirch/status/516717611141574656

[sidhujag]

Most contracts are closed out without delivery because both sides agree, unless the guy wants physical.. then the exchange has "extra" paper work to do to sort you out.

This is true and it is hard to imagine how any trading market could be different. Not allowed to close out a position?

The important point is though, if you feel physical is worth more than the offered price for whatever reason, you have the option to take it.

I dont think you can like i said unless you tell the exchange before.. They want to know your intentions beforehand although by law you can always request delivery

[majamalu]

this is about the most bullish Bitcoin sign we could have; David Birch bullish on Ethereum:

https://twitter.com/dgwbirch/status/516717611141574656

    I'm waiting for the first "Bitcoin is dead" title to go all in.

[smooth]

Most contracts are closed out without delivery because both sides agree, unless the guy wants physical.. then the exchange has "extra" paper work to do to sort you out.

This is true and it is hard to imagine how any trading market could be different. Not allowed to close out a position?

The important point is though, if you feel physical is worth more than the offered price for whatever reason, you have the option to take it.

I dont think you can like i said unless you tell the exchange before.. They want to know your intentions beforehand although by law you can always request delivery

The option being there ensures that prices are kept in line (by professionals if nothing else).

Since it is 100 ounces and roughly 120K USD per contract, a little paperwork is not out of line. The exchange mostly wants to know is that you can actually pay for and physically take delivery, to avoid broken settlements.

[adamstgBit]

this is about the most bullish Bitcoin sign we could have; David Birch bullish on Ethereum:

https://twitter.com/dgwbirch/status/516717611141574656

 Ethereum

[Trader Steve]

Circle is great news for those who don't value privacy, don't care about middlemen, and don't worry about counterparty risk.
https://www.reddit.com/r/Bitcoin/comments/2hujcf/circle_is_great_news_for_those_who_dont_value/

[NewLiberty]

Most contracts are closed out without delivery because both sides agree, unless the guy wants physical.. then the exchange has "extra" paper work to do to sort you out.

This is true and it is hard to imagine how any trading market could be different. Not allowed to close out a position?

The important point is though, if you feel physical is worth more than the offered price for whatever reason, you have the option to take it.

I dont think you can like i said unless you tell the exchange before.. They want to know your intentions beforehand although by law you can always request delivery

The option being there ensures that prices are kept in line (by professionals if nothing else).

Since it is 100 ounces and roughly 120K USD per contract, a little paperwork is not out of line. The exchange mostly wants to know is that you can actually pay for and physically take delivery, to avoid broken settlements.

Legal Tender law allows the settlement of any debt in fiat.  Most of the ETF filings also make that explicit.  Make no mistake, they never have to give you gold.

In the normal course of its business, the Fund is party to financial instruments with off-balance sheet risk. The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in a future obligation or loss. The financial instruments used by the Fund are commodity futures, whose values are based upon an underlying asset and generally represent future commitments which have a reasonable possibility to be settled in cash or through physical delivery. The financial instruments are traded on an exchange and are standardized contracts.

They can opt deliver cash instead, at their choice.

Another example:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/7_Jim_Rickards_-_Swiss_Bank_Client_Denied_His_$40_Million_in_Gold.html

[cypherdoc]

Most contracts are closed out without delivery because both sides agree, unless the guy wants physical.. then the exchange has "extra" paper work to do to sort you out.

This is true and it is hard to imagine how any trading market could be different. Not allowed to close out a position?

The important point is though, if you feel physical is worth more than the offered price for whatever reason, you have the option to take it.

I dont think you can like i said unless you tell the exchange before.. They want to know your intentions beforehand although by law you can always request delivery

The option being there ensures that prices are kept in line (by professionals if nothing else).

Since it is 100 ounces and roughly 120K USD per contract, a little paperwork is not out of line. The exchange mostly wants to know is that you can actually pay for and physically take delivery, to avoid broken settlements.

Legal Tender law allows the settlement of any debt in fiat.  Most of the ETF filings also make that explicit.  Make no mistake, they never have to give you gold.

there's no way any of the ETF's will allow settlement for retail investors with the underlying, be it gold or BTC.