
Winklevoss Bitcoin Trust - markmassie
http://www.sec.gov/Archives/edgar/data/1579346/000119312514457552/d721187ds1a.htm
======
Animats
This is not a way to "grow Bitcoin". It's a way for a big holder to dump a lot
of Bitcoins without, they hope, crashing the market.

The terms are awful: _" The Shareholders’ limited rights of legal recourse
against the Trust, Trustee, Sponsor, Administrator, Trust Agency Service
Provider and Custodian and the Trust’s lack of insurance protection expose the
Trust and its Shareholders to the risk of loss of the Trust’s bitcoins for
which no person is liable."_

 _" The Trust will not insure its bitcoins. The Custodian will maintain
insurance with regard to its custodial business on such terms and conditions
as it considers appropriate in connection with its custodial obligations and
will be responsible for all costs, fees and expenses arising from the
insurance policy or policies. The Trust will not be a beneficiary of any such
insurance and does not have the ability to dictate the existence, nature or
amount of coverage. Therefore, Shareholders cannot be assured that the
Custodian will maintain adequate insurance or any insurance with respect to
the bitcoins held by the Custodian on behalf of the Trust. Further,
Shareholders’ recourse against the Trust, Custodian and Sponsor under [New
York] law governing their custody operations is limited. Similarly, the
Shareholders’ recourse against the Administrator and Trust Agency Service
Provider for the services they provide to the Trust, including those relating
to the provision of instructions relating to the movement of bitcoins, is
limited. Consequently, a loss may be suffered with respect to the Trust’s
bitcoins which is not covered by insurance and for which no person is liable
in damages."_

I've never seen terms this unfavorable to shareholders in a prospectus before.
They're taking on less liability than Mt. Gox took on. If the Bitcoins
mysteriously disappear, no one is liable.

~~~
ucha
You must be right when you say that big players will be able to sell a lot of
bitcoins with a measured market impact. That's closely related to an improved
liquidity on the markets which will help grow Bitcoin.

Otherwise, no large exchange insures bitcoins stored in their cold wallets -
which will be the case here. The risks are not well understood/priced yet...

[http://www.coindesk.com/coinbase-names-aon-bitcoin-
insurance...](http://www.coindesk.com/coinbase-names-aon-bitcoin-insurance-
broker/)

------
ucha
If the SEC approves it, this would be great news for bitcoin. Assuming the ETF
is sufficiently liquid, it would allow:

\- easy shorting of bitcoins which facilitate price discovery

\- lower transaction costs. The cheapest and most liquid exchanges still
charge .2% per transaction + spread. Most (all?) of them charge you for
getting cash in our out of their platform. Buying shares of an ETF would cost
just spread + transaction cost charged by your broker which should be much
lower (.0035 per share on Interactive Brokers for example)

\- easy hedging of a real bitcoin position. Let's say you hold a large
fluctuating position in bitcoin that would like to hedge in USD. You could
continuously convert all your BTC to USD or go long/short the ETF which is
much cheaper.

~~~
unreal37
Not sure this is true. The registration documents claim shares can only be
traded in 50,000 share blocks (called "Baskets", approx worth $1 million at
launch) and you have to be a registered broker-dealer (with a bunch of other
rich-people-problem restrictions) to trade.

Am I missing something? Or will broker-dealers turn around and sell single
shares to the public? Or these statements don't mean what I think they mean?

~~~
foobarqux
APs are responsible for creating and dissolving trust shares in order to keep
the share price close to asset value. The shares are traded on an open market,
meaning retail investors can trade them. What retail investors can't do is
take a bunch of BTC, give it to the trust and get USD back, or vice versa.

~~~
DrStalker
So the 50,000 "basket" relates to buying and selling bitcoins with the trust,
not for end users buying shares in the ETF?

~~~
justincormack
Yes, thats how ETFs work, splitting retail and wholesale trades out.

------
anigbrowl
I don't think it matters. Per blockchain.info, the volume of Bitcoin
transactions is in gradual decline over the last year and seems stuck at about
$50m USD/day, despite many more merchants offering to accept payment. Market
cap is fairly steep decline and hash rate has been leveling off.

[https://blockchain.info/charts/estimated-transaction-
volume-...](https://blockchain.info/charts/estimated-transaction-volume-usd)
[https://blockchain.info/charts/market-
cap](https://blockchain.info/charts/market-cap)
[https://blockchain.info/charts/hash-
rate](https://blockchain.info/charts/hash-rate)

It just struck me that the market cap trend seems to have gone down in very
similar fashion tot he price of oil over the last 6 months. If enough people
who bought bitcoin did so primarily as a hedge, then you'd expect it to
loosely track a basket of popular commodities like oil and gold (the price of
which looks quite similar to Bitcoin's market cap over the last year IMHO -
[http://goldprice.org/](http://goldprice.org/)). Can't wait for Google to get
their automatic statistician tool online - I don't like statistics well enough
to want to use R regularly but I would love a tool that I can use to quickly
measure the coupling between different datasets.

~~~
Adlai
The amount of bitcoins being spent is a function primarily of the amount of
bitcoins earmarked for spending by the userbase, rather than the number of
deals closed by a payment processor's sales team.

------
murbard2
It's not about the liquidity. It's not about shorting. It's not about
leveraging. It's a little bit about ease of investing. It's a _lot_ about the
fact that once this is available, hordes of brokers can make commissions by
recommending their clients buy into this ETF.

------
minimax
This is just a new version of the S-1. The SEC still hasn't approved the ETF
for sale.

------
dnautics
By being in the general markets, bitcoin will finally have mass access to
leveraged trading. The result will be that bitcoin will finally see a 'true
bubble'. While the bitcoin price has been decreasing, it's not really been a
bubble as the popping of a bubble is usually twice as fast as its inflation,
the opposite of which is true in the current bitcoin decrease.

A good resource on the connection between leverage and financial bubbles is
Kindleberger's "Manias, Panics, and Crashes"

~~~
jim_greco
You really can't lever up equities all that much. Mom & pop can margin up to
50%. Even professional investors are quite constrained in how much leverage
they can apply for outright bets.

~~~
cylinder
Which is ridiculous, because an S&P500 index fund is a much less risky asset
over 30 years than a 4-bdrm house on Maple St in Anywhere, Michigan, yet 20:1
leverage is available for the latter. Unfortunately the government favors
homes as an asset class and has distorted the market with policy.

I'd much rather put $50,000 down on something like a 30-yr mortgage for
$250,000 in a diversified index fund than do the same in a house. But alas
this isn't an available product.

~~~
refurb
_I 'd much rather put $50,000 down on something like a 30-yr mortgage for
$250,000 in a diversified index fund than do the same in a house. But alas
this isn't an available product._

I agree with your point, but at the same time I'm not sure I'd want the
irrational exuberance that we saw (and will see again) in the real estate
market to start happening to equities!

------
apaprocki
One thing sticks out as a red flag to me: they invented their own spot index
(the Winkdex(R)) to price their NAV and that index includes BTC-e. BTC-e is a
widely used site in the Bitcoin world, but no one knows who operates it or
exactly where they are located (Bulgaria? Russia?). You would seriously base a
large component of your index pricing an SEC regulated instrument on a number
coming from unknown individuals who can not sign a contract or accept any
liability? When people in the Bitcoin world always wonder "Why did X not
include BTC-e?? How incompetent!" they never stop to think that there is no
one on the other side that can pick up the pen.

~~~
sheetjs
> that index includes BTC-e

Not necessarily. All they say is:

> The Index Provider’s Winkdex formula provides a volume-weighted, exponential
> moving average market price by blending trading data from the three largest
> Bitcoin Exchanges by volume on a list of Index Provider-approved Bitcoin
> Exchanges.

> As of December 26, 2014, the eligible Bitcoin Exchanges include Bitfinex,
> BitStamp, BTC-e, CampBX and LocalBitcoins.

Needless to say, if BTC-e is not one of the three largest BTC exchanges, then
it won't be included.

Assuming there's a way to verify every trade reported by BTC-e on the
blockchain, shouldn't irregularities show up relatively quickly? More
importantly, it seems that they do recognize that possibility: "Even in the
absence of large trading fees and fiat currency deposit/withdrawal policies,
price differentials across Bitcoin Exchanges remain; for example, bitcoins on
BTC-e traded at a discount of approximately 0.9 percent relative to the
average daily weighted price for bitcoins on BitStamp and Bitfinex during the
week ended December 26, 2014. During the prior month, prices on BTC-e
typically traded at a discount of between zero and five percent."

~~~
tyrfing
> Assuming there's a way to verify every trade reported by BTC-e on the
> blockchain

There is no way to verify the veracity of trades on _any_ of these exchanges.
The only part that touches the blockchain is deposits and withdrawals, and
those are extremely hard to track.

I agree that including BTC-e on that list is a very odd decision, considering
they have excluded OKCoin, Huobi, and other Chinese exchanges which make up
the lion's share of the market (even ignoring the wash trading).

BTC-e has a reputation of being something akin to Liberty Reserve, in that
they exist primarily to enable drug dealers, thieves, and anyone else with
dirty money to obtain fiat no questions asked.

------
gojomo
The Winklevosses are most famous for claiming their 'tech guy' ran off with
their billion-dollar secrets.

Have they become better at managing secrets and 'tech guys'? Because that's
what's necessary to safely hold a lot of Bitcoin.

~~~
refulgentis
An amusing oversimplification, but an oversimplification nonetheless. They
didn't view it as a "billon-dollar secret", but there's clearly something
morally deficient about being contracted to work on something and then moving
on with a clone of that something.

------
justinireland
Doesnt the ETF also open the door to institutional funds that are normally
restricted to specific assets? Seems to me that is the biggest advantage of a
bitcoin ETF as it will open the gates to more capital for bitcoin investments.

~~~
jcliff
This is exactly my thought as well. Not just for institutional money either.
This makes it dramatically easier and simpler for retail investors (in both
taxable and tax advantaged accounts) to get some exposure to BTC.

------
ssharp
Is this the only way to cash out a large amount of BitCoins?

~~~
wmf
No, there are several reputable brokers like SecondMarket and Coinsetter that
can do that.

~~~
gaadd33
Could those cash out holdings in the ballpark of the Winklevoss twins? Another
comment put their holdings at about 100K BTC. I didn't think there were any
exchanges that had near that sort of volume.

------
califield
They're going to trade Bitcoin under the NASDAQ symbol COIN. I love it!

~~~
fennecfoxen
I prefer the bit about how the "Delaware Trust Company, a Delaware trust
company, acts as the trustee of the Trust".

nice name there DTC.

------
bobcostas55
I think it's really sad that Bitcoin trading ended up being so ridiculously
expensive to trade that an ETF listed on traditional markets will drop the
costs by an order of magnitude.

------
Kiro
> In March 2014, it was announced that the twins had purchased seats on
> Richard Branson's Virgin Galactic shuttle using the profits they had made
> from Bitcoin. [1]

I wonder how much bitcoins they own.

[1]
[http://en.wikipedia.org/wiki/Winklevoss_twins#Bitcoin](http://en.wikipedia.org/wiki/Winklevoss_twins#Bitcoin)

EDIT: From the top of the article: "In April 2013, the brothers claimed they
owned nearly 1% of all Bitcoin in existence at the time."

~~~
firloop
On April 3rd, 2013, there were 10,988,125 bitcoins in circulation[1].

10,988,125 * .01 = about 109,881 BTC.

109,881 * $320 (current market value of bitcoin) = $35,161,920.. not bad.

The price of bitcoin in April 2013 was about $138[2]... so if they bought all
of them then (I think they got into bitcoin earlier than that so this is
unlikely) they would have paid around $15,163,578 for them, so a return of
approximately $19,998,342 (131%) from April 2013 to now.

[1]: [https://blockchain.info/charts/total-
bitcoins?timespan=2year...](https://blockchain.info/charts/total-
bitcoins?timespan=2year&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=)

[2]: [https://blockchain.info/charts/market-
price?timespan=2year&s...](https://blockchain.info/charts/market-
price?timespan=2year&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=)

~~~
iopq
I heard of them getting into bitcoin when it was still around the $10 mark,
they could have even bought in earlier.

------
jekrb
If you have access to the dev console I highly recommend setting the max-width
of the body to 40em. The text spans all the way across the screen by default.

~~~
yafujifide
I was able to set the width of the body using this command:

document.querySelector('body').style['width'] = '40em';

However, setting the max-width did not work:

document.querySelector('body').style['max-width'] = '40em';

Any idea why?

~~~
elmin
CSS attributes become camelCased on the style object.

    
    
        document.body.style.maxWidth = '40em'(
    

Will work.

~~~
yafujifide
That's it! Thanks.

------
pnathan
Interesting. If accepted, I am tempted to buy a few shares and see what falls
out over time.

~~~
nostromo
Why not buy bitcoin directly?

I get gold trusts, like GLD -- transporting and storing and selling gold is a
pain. But it's easy to buy and store Bitcoin using a service like CoinBase.
Not to mention the fact that you'll be paying management fees.

I suppose if you wanted to put bitcoin in your IRA this would be helpful.

~~~
ingler
I honestly don't understand using a service to store bitcoins when a paper
wallet using keypairs with offline-generated addresses is so readily
available.

One of the aspects of Bitcoin that gives it value is cutting out third parties
for storage.

~~~
gnaritas
> I honestly don't understand using a service to store bitcoins when a paper
> wallet using keypairs with offline-generated addresses is so readily
> available.

I honestly don't understand using a bank to store dollars when using a wallet
is so readily available.

Do you not see the flaw in your thinking? People with large amounts of money
don't want the responsibility of securing their own money themselves. Storing
Bitcoin's despite what people may say, is not trivial for the average person.

~~~
ingler
I see no flaw in my thinking. I'm not the average person.

Perhaps people should get up to speed before using Bitcoin unless they want to
lose their money. Storing btc with a third party is a great way to lose them.

~~~
CamperBob2
The whole concept isn't ready for prime time. In my case, I lost a
(fortunately) small hoard of BTC when I made the grievous error of backing up
my wallet.dat file to a Synology NAS that was also using an open port to run
my security camera server.

"Use Linux! Windoze is insecure!" they said.

Right.

~~~
shutupalready
What happened exactly?

How much did you lose (if you don't mind saying)?

How long was it before you noticed?

Do you think you were (a) individually targeted as a BTC holder, or (b) do you
think someone was port scanning the Internet and stumbled onto you?

If (a), how did they know you might have BTC? If (b), is it actually
commonplace for automated attacks to seek BTC wallets these days?

~~~
CamperBob2
About 4 BTC in my case, but many people lost a lot more. I was definitely not
individually targeted, and definitely did not make any of the usual novice
mistakes. Since the Synology NAS systems are commonly used as backups for
small and medium-level enterprises, they were (and are) exceptionally high
value targets. In my case, I had a root exploit in the OS that allowed all
kinds of malware to be installed by anyone who cared to scan the Internet at
large for systems on port 5000.

Most of the publicity centered around trojan miner applications, but the same
issue also exposed the entire file system. So, searching the exposed file
systems for wallet.dat files was a trivial and obvious free lunch for the
crackers, much more so than mining.

In retrospect, I think the biggest mistake was using the same port for things
like the security camera server that is used for remote administration. Taking
the time to learn how to use a nonstandard port would probably have kept this
particular system safe. I can't blame Synology, really... just a bad threat
assessment on my part. My thinking was that keeping the wallet.dat file off of
any Internet-accessible Windows boxes would provide enough "security by
obscurity," but we all know how that story usually ends.

------
elwell
> as measured by the Winklevoss IndexSM (“Winkdex®”)

------
foobarqux
The real problem with the ETF is that the index used for pricing is not
independent.

~~~
patio11
This is mostly irrelevant. The index used for pricing could be a weighted
average of Thomas' and my karma, but if the trust was still backed by ~0.2 BTC
per share and had working redemption mechanics, one would expect shares to
trade around where rational market participants thought 20% of a Bitcoin was
worth.

------
kumarski
I wish the SEC website was properly responsive.

------
benguild
I still think it's funny that these guys clearly just went on HN and read
about Bitcoin and randomly invested. Good for them though.

~~~
rsacco
[http://explainbitcoinlikeimfive.com](http://explainbitcoinlikeimfive.com)

please don't remain ignorant.

~~~
juliangregorian
Thanks for linking the most condescending site ever. Please also tell me how
vaccines don't actually cause autism.

------
7Figures2Commas
The Risk Factors section could be tightened up. "Bitcoin lost over half its
value in 2014"[1] would probably suffice.

[1]
[http://www.bloombergview.com/articles/2014-12-23/and-2014s-w...](http://www.bloombergview.com/articles/2014-12-23/and-2014s-worst-
currency-wasbitcoin)

~~~
EStudley
The price of Bitcoin in early 2014 was based on popularity and hype. I really
think that the normalization of a price for Bitcoin is good for the currency,
and that's what I've seen happening.

~~~
mrgordon
Not to be argumentative, but I see very little indication that any
"normalization" is happening in Bitcoin prices unless you simply mean that it
is trending downwards more steadily over time.

    
    
      Jan 1, 2014: $770.44
      April 1, 2014: $478.72
      July 1, 2014: $635.59
      October 1, 2014: $381.33
      December 31, 2014: $315.33
    

The numbers above indicate massive volatility. At first glance, it doesn't
look as bad from October 1 to December 31, but if you look at the chart then
you'll see it went up to $427.24 on November 12 before losing an average of
$2.28 _per day_ for a month and a half to get where it is today...

I do agree that the earlier prices were simply based on hype though. Typical
buy high and sell low behavior.

~~~
gwern
> The numbers above indicate massive volatility.

You could look at an actual calculation of volatility instead of eyeballing
some random prices: [https://btcvol.info/](https://btcvol.info/) Right now
we're in a pretty quiet period after the bubble in Jan 2014.

~~~
mrgordon
Yes the actual volatility calculation is better but my numbers illustrate my
point which is that the price is by no means stable in an absolute sense. We
are in a "quiet period" relative to what happened during a massive bitcoin
bubble but even the site you linked indicates that the volatility is twice
that of gold and approximately three times that of major currencies even
though we're in a quiet period.

Also note that the site is measuring historical volatility instead of implied
volatility as is customary for most financial instruments so it can't be
compared one-to-one with VIX or similar measures.

