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BIT Poised to Become Publicly Traded Bitcoin Fund

133 points by softdev12 12y ago

softdev12 12y ago
Summary of this article: 1) Barry Silbert's BIT has beat the Winklevoss' (or Winklevii) bitcoin fund to market by using a backdoor listing technique. 2) Finra granted its request for a permanent ticker symbol, GBTC, and that “is expected to be effective shortly.” 3) Each share of BIT is worth approximately one-tenth of a bitcoin. As of Friday, the trust’s net asset value stood at $24.43 per share.
- narrator 12y ago
  Oh goody, I can short bitcoin now.
  - dangero 12y ago
    Not sure if you're serious, but at what price would you stop shorting? What strategy would you use? Short with a trailing stop?
  - tcbawo 12y ago
    Shorting and options will probably help to stabilize price volatility (I'm neutral on bitcoin).
  - kryptiskt 12y ago
    As a bonus you get the considerable chance that they will lose all their bitcoins in a hack/fraud for free. Hmmm... going long bitcoin and shorting this may be the trade to do.
    - eru 12y ago
      That's what the fund's issuers are doing, too.
    - MichaelApproved 12y ago
      Before thinking this is a free trade, consider that it costs money to short a stock. In order to short the stock, you need to first borrow it from someone so that you could sell it to someone else. When borrowing a stock, you have to pay an interest rate for the shares which were loaned to you. Some stocks are cheap to short while others could have high double digit interest rates. The rate depends on the willingness of people to lend and volatility.
  - deleted 12y ago
    [deleted]
    - TomGullen 12y ago
      50x leverage for something as volatile and illiquid as Bitcoin on unregulated exchanges is idiotic
      - deleted 12y ago
        [deleted]
      - tim333 12y ago
        Idiotic for the punters. Can be a nice earner for the exchanges.
  - Sealy 12y ago
    Check out http://btc.sx/ http://btc.sx/
  - kudu 12y ago
    You can already do it at BitFinex with 3:1 leverage.
  - deleted 12y ago
    [deleted]
  - baddox 12y ago
    Now all the people who say they wish they could short bitcoin will need another excuse for why they don't short bitcoin.
  - kingrolo 12y ago
    You already can on a few places. OKCoin seems to be most popular, and up to 20X leverage on their futures, http://okcoin.com/ http://okcoin.com/
TomGullen 12y ago
Is this an ETF? If so, what happens to the ETF if the underlying asset is lost/stolen?
- bbanyc 12y ago
  The ETF files for bankruptcy and the creditors and shareholders divvy up the remaining assets (which will be practically nothing).
  - MattCamHam 12y ago
    Especially nothing for shareholders, since creditors get paid first.
- almutasim 12y ago
  It is not an ETF.
- minimax 12y ago
  ETF stands for exchange traded fund. This will trade over the counter (OTC) and won't be listed on an exchange, so it isn't technically an exchange traded anything. The other problem is that there is no creation process for publicly tradable shares. With a typical ETF, there are entities known as "authorized participants" who can exchange a fixed amount of the underlying securities for shares in the ETF (and vice versa). This creates the mechanism for the ETF price to track the price of the underlying securities. If the price of SPY rises above the price of the S&P 500 index, APs can buy the underlying securities, exchange them for new shares of SPY, then sell the SPY shares. This pushes the price of SPY down towards the fundamental value. That process doesn't exist for BIT because new publicly tradable shares can be created only through this weird 12-month lockup expiration process. It will be interesting to see how it trades!
readme 12y ago
Will be traded on OTC markets? I believe OTC is where most penny stocks are bought and sold, right? So this should be a pretty good gambling opportunity. Wish I knew the exact date this thing launches.
placeybordeaux 12y ago
Well this is not good for price stability, has to happen though.
- tdaltonc 12y ago
  Why not? More volume = more stable.
noipv4 12y ago
Why did they choose OTC? Usually the shady penny-stocks or the Qs are traded OTC.
- nandemo 12y ago
  It's in the article. Lower regulatory hurdles compared to launching a proper exchange-traded fund.
- ksherlock 12y ago
  It's the stock market version of a MVP -- ignore regulations and reporting standards to get it out fast.
toolz 12y ago
Can anyone explain to me what the purpose of owning bitcoin stock is as opposed to just owning bitcoin?
- MattCamHam 12y ago
  It is easier to buy / sell an exchange traded fund than bitcoin. You can use an existing brokerage account to buy it.
- aqme28 12y ago
  For one, there's less worry that you'll forget your private keys or have them stolen.
- breadtk 12y ago
  It's the same reason why you don't buy and own steel, but rather you buy stock in a mining conglomerate or a refinery. Owning a piece of a business in the long-run may be more less volatile than the commodity itself. Though the two can't necessarily be separated in terms of future outlook.
  - IkmoIkmo 12y ago
    As the fund tracks the price of bitcoin, this isn't a reason that applies in this case. It's not a fund that tracks the value of Coinbase and Bitpay etc, there are barely any public bitcoin companies anyway (maybe 1 or 2 as far as I know, and they're not big players either.) It's interesting because it interfaces with existing investment infrastructure, culture, protocols etc. Trying to buy, store securely and apply proper accounting rules to a not fully defined (by law) digital currency concept, is not something investment firms want to bother with unless they specialize in bitcoin. (like SecondMarket). Instead, they'd just want to pull up a vetted fund on an exchange they're familiar with, on their bloomberg terminal they're familiar with, purchase a financial product whose structure they're familiar with, and apply the same accounting standards as they would normally, and deal with the normal legal ramifications of shares of ETFs. This essentially means anyone can now get exposure to the price of bitcoin without any extra understanding or investment necessary on the technical bits of storage, accounting etc. And that could be very interesting. Bitcoin makes for a great opportunity. It can go to 0, or it can do 100x or even 500x value growth in the next 20 years. And I'd say the odds of the latter are greater than 10%. That's why it's not such a crazy idea for billion dollar funds to put $10m into bitcoin, as they'd have a chance of making billions at the cost of losing millions. I wouldn't be surprised if, now that it's easy for any pension fund, hedge fund, family fund or university endowment fund to buy in, that we'll see quite a few of them do. At least, that's always been the story. "If pension funds dedicated only 0.1% to bitcoin, the price would go up one or two orders of magnitude this decade" or something to that effect. We'll see how this one plays out.
tuna-piano 12y ago
I wonder if market dynamics will force an artificial increase in the value of bitcoin. If the bitcoin market is operating properly, a bitcoin ETF existing should not increase the price of bitcoins. If it does, can we assume bitcoins are overvalued? In the housing boom people built houses and sold mortgages because they were a good investment, not because people actually needed the houses. If the bitcoin ETFs make speculative buying of bitcoins so easy for the average joe, we could see a huge bitcoin price increase, followed by a crash a while later.
kolev 12y ago
Thanks for these temporary bumps so that I can finally sell my overpriced bitcoins left at a minimal loss, close this page, and move forward to some more meaningful investment strategies.
- kolev 12y ago
  Why downvote? I represent a big share of the holders who didn't capitulate yet.
artursapek 12y ago
Big news. Sent the price for a big jolt! https://cryptowat.ch/bitfinex/btcusd/30min https://cryptowat.ch/bitfinex/btcusd/30min
- bdcravens 12y ago
  It jumped up about $15, the same as it jumped when Coinbase exchange rumors came out, and well short of the PayPal partnership announcement. (about $50) In both of those cases, the price retreated to previous levels within a day.
  - artursapek 12y ago
    That's why trading Bitcoin is fun
- vinchuco 12y ago
  There's a strong bias for short jumps, not so much attention for constant falls. This claim also depends on which time scale you use.
habosa 12y ago
Additional Note: Barry Silbert is the founder of SecondMarket. Not sure what they're doing now (website is confusing) but when I interned there in 2012 they were a marketplace for all sorts alternative assets. They became somewhat well known when they made a deal with Facebook to be the exclusive pre-IPO market for Facebook equity. They made a business of helping private companies organize buying/selling of their shares. They branched out into all sorts of things including a gold fund, etc. So this seems like a natural move for Barry.
em70 12y ago
Hello, index arbitrage!

133 points by softdev12 12y ago

Summary of this article: 1) Barry Silbert's BIT has beat the Winklevoss' (or Winklevii) bitcoin fund to market by using a backdoor listing technique. 2) Finra granted its request for a permanent ticker symbol, GBTC, and that “is expected to be effective shortly.” 3) Each share of BIT is worth approximately one-tenth of a bitcoin. As of Friday, the trust’s net asset value stood at $24.43 per share.

narrator 12y ago
Oh goody, I can short bitcoin now.
- dangero 12y ago
  Not sure if you're serious, but at what price would you stop shorting? What strategy would you use? Short with a trailing stop?
- tcbawo 12y ago
  Shorting and options will probably help to stabilize price volatility (I'm neutral on bitcoin).
- kryptiskt 12y ago
  As a bonus you get the considerable chance that they will lose all their bitcoins in a hack/fraud for free. Hmmm... going long bitcoin and shorting this may be the trade to do.
  - eru 12y ago
    That's what the fund's issuers are doing, too.
  - MichaelApproved 12y ago
    Before thinking this is a free trade, consider that it costs money to short a stock. In order to short the stock, you need to first borrow it from someone so that you could sell it to someone else. When borrowing a stock, you have to pay an interest rate for the shares which were loaned to you. Some stocks are cheap to short while others could have high double digit interest rates. The rate depends on the willingness of people to lend and volatility.
- deleted 12y ago
  [deleted]
  - TomGullen 12y ago
    50x leverage for something as volatile and illiquid as Bitcoin on unregulated exchanges is idiotic
    - deleted 12y ago
      [deleted]
    - tim333 12y ago
      Idiotic for the punters. Can be a nice earner for the exchanges.
- Sealy 12y ago
  Check out http://btc.sx/ http://btc.sx/
- kudu 12y ago
  You can already do it at BitFinex with 3:1 leverage.
- deleted 12y ago
  [deleted]
- baddox 12y ago
  Now all the people who say they wish they could short bitcoin will need another excuse for why they don't short bitcoin.
- kingrolo 12y ago
  You already can on a few places. OKCoin seems to be most popular, and up to 20X leverage on their futures, http://okcoin.com/ http://okcoin.com/

TomGullen 12y ago

Is this an ETF? If so, what happens to the ETF if the underlying asset is lost/stolen?

bbanyc 12y ago
The ETF files for bankruptcy and the creditors and shareholders divvy up the remaining assets (which will be practically nothing).
- MattCamHam 12y ago
  Especially nothing for shareholders, since creditors get paid first.
almutasim 12y ago
It is not an ETF.
minimax 12y ago
ETF stands for exchange traded fund. This will trade over the counter (OTC) and won't be listed on an exchange, so it isn't technically an exchange traded anything. The other problem is that there is no creation process for publicly tradable shares. With a typical ETF, there are entities known as "authorized participants" who can exchange a fixed amount of the underlying securities for shares in the ETF (and vice versa). This creates the mechanism for the ETF price to track the price of the underlying securities. If the price of SPY rises above the price of the S&P 500 index, APs can buy the underlying securities, exchange them for new shares of SPY, then sell the SPY shares. This pushes the price of SPY down towards the fundamental value. That process doesn't exist for BIT because new publicly tradable shares can be created only through this weird 12-month lockup expiration process. It will be interesting to see how it trades!

readme 12y ago

Will be traded on OTC markets? I believe OTC is where most penny stocks are bought and sold, right? So this should be a pretty good gambling opportunity. Wish I knew the exact date this thing launches.

placeybordeaux 12y ago

Well this is not good for price stability, has to happen though.

tdaltonc 12y ago
Why not? More volume = more stable.

noipv4 12y ago

Why did they choose OTC? Usually the shady penny-stocks or the Qs are traded OTC.

nandemo 12y ago
It's in the article. Lower regulatory hurdles compared to launching a proper exchange-traded fund.
ksherlock 12y ago
It's the stock market version of a MVP -- ignore regulations and reporting standards to get it out fast.

toolz 12y ago

Can anyone explain to me what the purpose of owning bitcoin stock is as opposed to just owning bitcoin?

MattCamHam 12y ago
It is easier to buy / sell an exchange traded fund than bitcoin. You can use an existing brokerage account to buy it.
aqme28 12y ago
For one, there's less worry that you'll forget your private keys or have them stolen.
breadtk 12y ago
It's the same reason why you don't buy and own steel, but rather you buy stock in a mining conglomerate or a refinery. Owning a piece of a business in the long-run may be more less volatile than the commodity itself. Though the two can't necessarily be separated in terms of future outlook.
- IkmoIkmo 12y ago
  As the fund tracks the price of bitcoin, this isn't a reason that applies in this case. It's not a fund that tracks the value of Coinbase and Bitpay etc, there are barely any public bitcoin companies anyway (maybe 1 or 2 as far as I know, and they're not big players either.) It's interesting because it interfaces with existing investment infrastructure, culture, protocols etc. Trying to buy, store securely and apply proper accounting rules to a not fully defined (by law) digital currency concept, is not something investment firms want to bother with unless they specialize in bitcoin. (like SecondMarket). Instead, they'd just want to pull up a vetted fund on an exchange they're familiar with, on their bloomberg terminal they're familiar with, purchase a financial product whose structure they're familiar with, and apply the same accounting standards as they would normally, and deal with the normal legal ramifications of shares of ETFs. This essentially means anyone can now get exposure to the price of bitcoin without any extra understanding or investment necessary on the technical bits of storage, accounting etc. And that could be very interesting. Bitcoin makes for a great opportunity. It can go to 0, or it can do 100x or even 500x value growth in the next 20 years. And I'd say the odds of the latter are greater than 10%. That's why it's not such a crazy idea for billion dollar funds to put $10m into bitcoin, as they'd have a chance of making billions at the cost of losing millions. I wouldn't be surprised if, now that it's easy for any pension fund, hedge fund, family fund or university endowment fund to buy in, that we'll see quite a few of them do. At least, that's always been the story. "If pension funds dedicated only 0.1% to bitcoin, the price would go up one or two orders of magnitude this decade" or something to that effect. We'll see how this one plays out.

tuna-piano 12y ago

I wonder if market dynamics will force an artificial increase in the value of bitcoin. If the bitcoin market is operating properly, a bitcoin ETF existing should not increase the price of bitcoins. If it does, can we assume bitcoins are overvalued? In the housing boom people built houses and sold mortgages because they were a good investment, not because people actually needed the houses. If the bitcoin ETFs make speculative buying of bitcoins so easy for the average joe, we could see a huge bitcoin price increase, followed by a crash a while later.

kolev 12y ago

Thanks for these temporary bumps so that I can finally sell my overpriced bitcoins left at a minimal loss, close this page, and move forward to some more meaningful investment strategies.

kolev 12y ago
Why downvote? I represent a big share of the holders who didn't capitulate yet.

artursapek 12y ago

Big news. Sent the price for a big jolt! https://cryptowat.ch/bitfinex/btcusd/30min https://cryptowat.ch/bitfinex/btcusd/30min

bdcravens 12y ago
It jumped up about $15, the same as it jumped when Coinbase exchange rumors came out, and well short of the PayPal partnership announcement. (about $50) In both of those cases, the price retreated to previous levels within a day.
- artursapek 12y ago
  That's why trading Bitcoin is fun
vinchuco 12y ago
There's a strong bias for short jumps, not so much attention for constant falls. This claim also depends on which time scale you use.

habosa 12y ago

Additional Note: Barry Silbert is the founder of SecondMarket. Not sure what they're doing now (website is confusing) but when I interned there in 2012 they were a marketplace for all sorts alternative assets. They became somewhat well known when they made a deal with Facebook to be the exclusive pre-IPO market for Facebook equity. They made a business of helping private companies organize buying/selling of their shares. They branched out into all sorts of things including a gold fund, etc. So this seems like a natural move for Barry.

em70 12y ago

Hello, index arbitrage!