[GLBSE] Bitcoin Mining Fund (see post #2 for FAQ)

[usagi]

[GLBSE] Bitcoin Mining Fund (see post #2 for FAQ)

[Ben Walsh (beamer)]

A 50,000 BTC fund is small ?

Fair enough. What experience and credentials as a fund manager do you have ?

How long have you been involved with bitcoin and using GLBSE ?

Trust isn't such an issue as before, as I assume you will be fully verifying with GLBSE ?

What monthly dedicated time commitment will you be making ? Please state hours.

I may be willing to provide access to trading tools which could improve your performance as a fund manager but let's get the basic questions out the way first.

This is the sort of fund I am looking for.

[publio]

It's a 10,000 BTC fund; maybe you meant USD.  However, even that is not small for a first time offering.

Holding multiple mining symbols has the advantage of receiving dividends throughout the week, rather than only weekly.  Paying dividends only monthly may make some less likely to invest.  A month is a long time, when bitcoins are involved.  Another disadvantage of this is how it's going to affect the price.  The price of the fund wont be steady, but will depend on the time to the next payment.  This is because the dividend is large, compared to the price.  You can see this behavior, for different reasons, in the PPT.* funds.  I haven't observed it for miners.

[exahash]

Thanks for the point about weekly payments versus monthly payments. However a lot of things about the GLBSE seem weird to me. For example, a lot of miners are paying 1 to 3% per WEEK. If you have a background in finance you... well.. I won't say it here, but "wow, just wow".

Right.  The primary issue there is scale.  It's not so difficult to turn $1 into $2 again and again.  There's even a story out there about a guy who (through multiple trades) traded up from a paperclip to a car.  Or was it a house?  It is a lot more difficult to turn $1 billion in to $2 billion, let alone do it repeatedly.

Warren Buffet has been warning that Berkshire Hathaway is getting so big it won't be able to generate the stellar rates of return it has in the past.  

For example, if I told you I was offering a security on the GLBSE that paid 1% per month (guaranteed), no one would invest in it. But that's actually a really good price and for zero risk it's actually quite an unbelievable offer. I fear that interest rates are going to crash on the GLBSE within the year or prices will go up 4x to 5x or at least back up to where they were a year ago (say up by 3x to $15/btc).

Zero risk, huh?  I'd take that action if it *really* were zero risk, but the reality is that there are always some risks.  Even US Govt bonds have some risk.  Congress almost defaulted last year.  With more than $250k in a regular bank savings account you run the risk of loss if the bank goes under.  Your brokerage probably only insures your cash up to $5mm.

You could say the "premium" return rates on many glbse securities are there in large part *because* a lot of the investors understand that they really are pretty risky (compared to the dow 30, reits, junk bonds, or even your buddy's new restaurant).

[Garr255]

Why strictly mining companies? There are benefits from them such as constant dividends if price falls, but other than protection features like that I can't find a reason not to invest in others.

[farfiman]

Not accusing you of anything BUT if you would come to the lending thread today and ask for lets say 20...heck... 10 coins even , you would get scores of replies grilling you why they should trust you etc...etc...    Asking for 10,000 coins from the start is a brave move. I hope you are genuine but caution investors.

[Sukrim]

Two things that I would change/consider:

1) 1 BTC share price is bad for liquidity imho. - please make it 10 or even 1 Bitcent a piece and just issue 10 or 100 times more shares.
2) Monthly aggregated payouts will fluctuate a LOT especially with assets like YABMC that pay out after difficulty changes. Other assets also pay out only each weekend - there are months with 5 weekends...

Also I certainly do NOT like the "no insurance" policy, since you're likely selling at a NAV above 100%. To be worthwile, your NAV would need to be below 100% in my opinion.

Monthly payments + huge IPO can also lead to at least some time of "buy on the 29th and get double dividends". If you start with 0 assets, it's not good to buy in early and if everyone buys in late, there are no dividends yet here.

[rjk]

Hello, I'd like to make a quick announcement.

The news page (post #2) has been updated as follows:

2012-05-22: An interview with gigavps of Gigamining has been published on our blog.

Cool!

[Garr255]

Awesome insight on giga's operation. BMF seems like it will be a very promising asset.

[friedcat]

As a fund manager of MU, I have some questions. Hopefully they could help you elaborate a more detailed proposal.

1. Will the dividends of BMF solely come from the dividends of mining assets you receive? For example, if you buy 10,000 shares of Gigaming at 1.5BTC/s, and sell them at 1.6BTC/s after a month. Will the profits all be used for re-investing, or will you pay some of them as dividends?

2. Will you actively contact asset issuers for cheaper bulk purchase of shares? If so, have you already started at least getting them known?

3. There is already a GLBSE listed fund solely on mining investments called M.ETF. It has already existed for a long time. It's not an ETF though, it's a mutual fund as yours. The fund manager (JL421) made a very impressive summary of mining assets before he did the IPO (https://bitcointalk.org/index.php?topic=66610.0). If you do something similar, your fund will be more attractive to investors.

[MoneyIsDebt]

Are there mining companies on GLBSE you don't include in your fund? Why not?

[MoneyIsDebt]

Thanks for the comprehensive answer!
Regarding item 8: I'm new to GLBSE (and investment in general) - but looking at BMF there, I realized that if I bought shares at 0.95 or 1.0 , I wouldn't be able to get my money back unless you successfully sell your remaining 9000+ shares - because there's noone buying for more than 0.1 . Since it would take a lot of capital to fill buy the rest of the shares, the risk seems pretty high.
If someone (you?) would place a bid at 0.8 or something, it might help psychologically.. ?

[MoneyIsDebt]

Thanks again for your answer!

Could you share some thoughts on mining shares vs mining bonds, and how this affects BMF?

[MoneyIsDebt]

Well, some make a point out of their assets being shares as in you're buying not only parts of mining output, but parts of the actual hardware. Which would make a difference if it were sold f.ex. And that it gives voting rights. The difference might be in the contract, and might be hypothetical, depending on the trustworthiness of the operator.

[MoneyIsDebt]

You just have to watch out for the few who are.

That's what BMF is for - I can leave that to you

[Sukrim]

At least one company said, for example, that shareholders don't own hardware and in the next paragraph said that if the company liquidates it's hardware it will pay out the proceeds as dividend. This doesn't make sense to me.

As far as I understood that, they meant that you can not buy 10% of shares and then request to be sent 10% of their hardware in return. In the end you own the value of the hardware (as you get paid whe liquidating) but not the hardware itself. It's really badly worded, that's true...

[MoneyIsDebt]

Just a comment on your website - I saw no direct link to your GLBSE page. It would be convenient to have one.
The page says "footer here" at the bottom - this might be a good place for it.

[MoneyIsDebt]

Can't believe I missed it because of glbse downtime today

[GeoRW]

I don't know if GLBSE supports this, but you may consider  1/10 share split. 1 BTC per share is too high. I believe you could sell more and have bigger trade volumes at lower price. You investors would benefit out of this as well. When they decide to sell their shares they will find more bidders.
 BTW, do you plan to sell only those 10000 shares or you may issue more anytime you want to?

[GeoRW]

If you had lower prices people could easily reinvest their dividends into your fund. This way they may reinvest them into other assets and your fund will grow slower.