
Winklevoss Bitcoin Trust - petethomas
https://www.sec.gov/Archives/edgar/data/1579346/000119312516636535/d68862ds1a.htm
======
kristianp
Here's a diff of the filing:

[http://published.github.io/sec.gov/ChangeDetection%20-%20Com...](http://published.github.io/sec.gov/ChangeDetection%20-%20Comparison%20of:%20Amendment%20No.6.html)

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zekevermillion
If I'm not mistaken, the winkelvoss trust review process was delayed b/c they
shared a securities lawyer with Martin Shkreli.

[https://forum.bitcoin.com/bitcoin-discussion/winkelvoss-
twin...](https://forum.bitcoin.com/bitcoin-discussion/winkelvoss-twins-etf-
lawyer-evan-greebel-arrested-in-martin-shkreli-case-t4059.html)

Guess they have a new lawyer now...

~~~
smnscu
Off-topic, but I found Shkreli's interview on The Breakfast Club very
interesting:
[https://www.youtube.com/watch?v=hCEE_E8QUSc](https://www.youtube.com/watch?v=hCEE_E8QUSc)

~~~
baby
Never heard about that guy before, but he seems completely crazy:
[https://www.youtube.com/watch?v=lI9jywQ4cgc](https://www.youtube.com/watch?v=lI9jywQ4cgc)

There is a bit of an American Psycho vibe.

~~~
Taylor_OD
He has a couple interesting interviews out there. I wouldn't know how to find
it again but I watched a live stream where he was taking questions from
anyone. A gay man confronted him about his pricing of that one drug he raised
by several thousand percent. He actually had a decent answer. It might have
been all bullshit but it made me see him in a slightly different light.

~~~
smnscu
As far as I remember, his answer was that (1) the product was underpriced and
it's a company's duty to get as much profit as possible for their shareholders
etc. and (2) the product itself was very cheap and they offered it for free
for anyone without insurance – apparently about 40% of it was given away this
way. Now, he might just be a charismatic psychopath, but if this is true it
does indeed put him in quite a different light.

edit: yes, it might've been 60% instead of 40%, I wanted to err on the side of
caution :)

~~~
baby
in another interview with Vice, he says that 2/3 of the products were given
out for free. That only the big corporation would pay full price for the
product, so who cares? And that most of the profits (60%) would go into R&D.

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chollida1
A couple of notes from a skim of the updated

> The Trust values its bitcoin as measured at 4:00 p.m. Eastern time using the
> Gemini Exchange Spot Price on each Business Day. The Gemini Exchange Spot
> Price is the price of bitcoin on the Gemini Exchange as of 4:00 p.m. Eastern
> time on each Business Day.

So they are using the exchange they founded to price their bitcoin
trust.............hmmmm

> While the Trust’s investment objective is for the Shares to track the price
> of bitcoin as measured at 4:00 p.m. Eastern time using the Gemini Exchange
> Spot Price on each Business Day, the Shares may trade in the secondary
> market on BATS at prices that are lower or higher relative to the NAV. The
> amount of the discount or premium in the trading price relative to the NAV
> may be influenced by non-concurrent trading hours and liquidity between BATS
> and larger Bitcoin Exchanges in the Bitcoin Exchange Market.

This represents an interesting arbitrage opportunity. This could end up like
PHYS or SBT/CGT where they tend to trade at a discount to NAV.

> Under the License Agreement, the Sponsor is required to pay a monthly
> royalty equal to a percent of the net Sponsor Fee received by the Sponsor
> during the previous month based on a running royalty rate of between eight
> (8) percent and sixteen (16) percent of such net Sponsor Fees. WIP retains
> the right, but is not required, to terminate the license if the Sponsor does
> not meet a minimum royalty payment of $300,000 during the prior 12-month
> period, starting on the third anniversary of the License Agreement. The
> Sponsor has the right to sublicense its rights within the Field of Use in
> exchange for an obligation to pay a seventy-five (75) percent royalty based
> on revenue and/or any other compensation, if any, collected from such sub-
> license.

I'm not sure what IP the wiklevoss' company WIP has licensed to the trust, but
getting a free $300,000/year sounds like a good deal from them and not so much
for the unit holders.

So the winklevoss' license IP to the fund , use their exchange to price the
fund and the custodian of the fund is Gemini Trust Company, LLC, which they
also control.

One other thing that looks dubious is that the sponsor is Digital Asset
Services, LLC, You might google that and find Digial Assests
[https://digitalasset.com/](https://digitalasset.com/) a legitimate blockchain
company, but you'd be wrong.

> The Trust’s Sponsor is Digital Asset Services, LLC. The Sponsor is a
> Delaware limited liability company formed on May 9, 2013, and is wholly-
> owned by Winklevoss Capital Management, LLC (“WCM”).

So the name is about as close as you can get without being the same, I mean
I'm trying really hard to see a way in which this isn't intentionally
misleading, but sadly failing.

I mean, shit, why not just write these guys a cheque and buy your own
bitcoins.

~~~
xiphias
> So they are using the exchange they founded to price their bitcoin
> trust.............hmmmm

It's the other way around: they wanted an ETF, so they needed to create a
regulated exchange that has all the required licenses

~~~
cloudjacker
I just don't understand why people keep repeating that

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omginternets
Could someone please explain what I'm looking at? My financial education is
severely lacking ...

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justinlardinois
Can someone explain what sorts of factors would influence the value of this
trust and why an investor would want to participate in it?

~~~
naveen99
1\. Lower counterparty risk (the counterparty being a big stock exchange
rather than something like mt gox)

2\. easier hedging / large bets with options

3\. Can use existing retirement account

4\. Easier to include in a will.

~~~
scott00
There are two layers of counterparty risk here. One is to the broker who holds
custody of your ETF shares. This aspect is thoroughly regulated and insured by
the SIPC: not much to worry about. It's the same kind of counterparty risk you
take when you trade any stock.

The second is to the Winklevoss Bitcoin Trust, which practically speaking is
mostly a risk of security breaches or corruption involving the trust
custodian, Gemini Trust Company, LLC. There are some reasons to think this
might be safer than holding bitcoin yourself on the blockchain, or holding it
through an account at an online bitcoin exchange, but this risk is not even
close to being insured by a big stock exchange. In fact the S-1 says
explicitly that the bitcoin holdings are not insured by anyone. I would say
this part of the risk is much closer to counterparty risk with an online
bitcoin exchange than it is to counterparty risk to a big stock exchange.

~~~
naveen99
Yes you are right. Of course that 2nd risk is there even with any other
company. It's just the principal agent problem.

I don't know if options will be supported, but once they are, you could hedge
the second counterparty risk with far out of the money put options.

This is not it, but you could theoretically have bitcoin futures that are cash
settled only. Then you don't have the second counterparty risk at all.

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jegutman
This won't be the dumbest ETF, it will be a less than ideal way of holding
bitcoin. There are lots of ETFs that make it easy to get access to an asset
class and get the full economics (foreign exchange ETFs), these are still
probably not ideal, but they're reasonable, but bitcoin is pretty easy to buy
and sell not sure what benefit an exchange traded product has.

The Wikelvoss's do have a BTC exchange, is the goal to somehow tie this in?
Turn their exchange to a market that gets benchmarked? They did also launch
the BitIndex. Seems like trying to control the bitcoin benchmark could have
financial value.

~~~
darawk
Maybe it would allow mutual funds and other such entities to invest in it?

They might have rules preventing them from investing in things that aren't
traded on major exchanges.

~~~
jegutman
I'd be kind of surprised if mutual funds were doing much investing in this
kind of ETF. Look at the shares outstanding of FXE, FXA, FXB (currency etfs
for euro, australian dollar and pound), they're not very popular. Some hedge
funds do use these and famously Paulson was using GLD for his gold exposure (I
still think this is pretty dumb, he should've traded futures and EFP-ed into
spot gold). Wouldn't be shocked to be proven wrong, but most ETFs don't gain
traction. There's also a pretty small cap on how big this ETF can get (at
least for now), almost by definition the commodity backing a bitcoin etf has a
much much smaller availability than the commodity backing any other etf. I am
glad they're using cold storage to store them at least.

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RhysU
What makes it illegal to mark the time at which the trust evaluates it's
shares? Marking the close for COIN on BATS is illegal. Marking the
corresponding BTC event...?

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justaman
So I can invest in peoples desire to buy drugs off the dark web?

~~~
woodman
Hear, hear! We mustn't allow others to buy things that we don't approve of
from markets not easily bent to our will by force! Who would want a baby that
has been in dirty bathwater?

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solotronics
GBTC tanking in 5..4..3..2..1.. wouldn't there be a lot of arbitrage between
GBTC and this Winklevoss Trust thus normalizing the price of GBTC ?

~~~
everfree
Arbitrage is only possible when there is a low-friction way to redeem an asset
for the raw good it's backed by. In the case of traded funds like this, they
can only be redeemed in large batches, which means that there should be no
more arbitrage opportunity than what's already possible now.

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jkoschei
If you were the inventors of bitcoin, you'd've invented bitcoin.

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youngButEager
Many of us find it obscene and a bit ridiculous that this easily-manipulated
sham for the foolish-minded is even mentioned on HN. Having worked as a
software engineer since 1991 -- with a CS degree from UC Berkeley no less -- I
cannot think of a single serious-minded peer who takes BTC seriously, all
computer people too.

I find it questionable that, just because the U.S. Government has been duped
to allow this ETF -- while simultaneously doing everything in their power to
undermine BTC -- we somehow must suffer to find BTC held up as a legitimate
medium of exchange.

It's really not. It wasn't several years ago when everyone was told "soon it
will be accepted everywhere cash and credit cards are" \-- and it's not now a
legitimate medium of exchange.

Some one(s) will eventually recognize BTC for what it is: a purely speculative
gamble, and _not_ a legitimate or _safe_ means of exchange.

THIS IS THE U.S. GOVT. -- 3 years ago:
[https://gigaom.com/2013/05/14/homeland-security-seizes-
funds...](https://gigaom.com/2013/05/14/homeland-security-seizes-funds-at-
main-bitcoin-exchange-report/)

THIS IS THE U.S. GOVT. -- 9 months ago: _" U.S. government is calling bitcoin
anything but a currency"_
[http://www.forbes.com/sites/peterferrara/2013/08/25/the-
fede...](http://www.forbes.com/sites/peterferrara/2013/08/25/the-federal-
governments-reaction-to-bitcoin-is-an-acknowledgement-of-the-dollars-
vulnerability/#72e483403e9e)

Many of us who read HN fully believe that touting or merely holding up
speculative gambling indulgences is just not appropriate.

If you like, have a look here for just a _small_ history of victims of BTC,
and keep well in mind BTC is not accepted in lieu of cash, credit cards, etc.,
so the argument 'regular money gets stolen too' doesn't wash, because BTC has
no practical utility as a medium of exchange, making it illogical for anyone
but a gambler to 'invest' in it:

THIS LIST IS 2 YEARS OLD
[https://bitcointalk.org/index.php?topic=576337](https://bitcointalk.org/index.php?topic=576337)

~~~
justin_vanw
Give me a single, just one single, way that a BTC ETF different than owning
shares in a gold mining company, using the language of economics.

If you want a simpler problem, how is it different from an ETF that tracks the
price of gold?

~~~
jpatokal
The odds of gold being completely worthless 5 years from now are rather lower
than the odds of BTC being completely worthless 5 years from now.

~~~
alex_young
Why? Gold has the same basic economic proposition: * Mined at a steady and
predictable rate * Ecologically destructive * Valued because it is hoarded *
Hoarded because it is valued

~~~
jrockway
Can you plate Bitcoins on to metals to produce a layer that doesn't corrode or
oxidize? Because gold is pretty good at that.

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zby
""" Bitcoin is a digital asset (“Digital Asset”) based on the decentralized,
open source protocol of the peer-to-peer Bitcoin computer network (the
“Bitcoin Network” or “Bitcoin”)2 that hosts the decentralized public
transaction ledger, known as the “Blockchain,” on which all bitcoin is
recorded. The Bitcoin Network software source code includes the protocols that
govern the creation of bitcoin and the cryptographic system that secures and
verifies Bitcoin transactions. The Blockchain is a canonical record of every
bitcoin, every Bitcoin transaction (including the creation or “mining” of new
bitcoin) and every Bitcoin address associated with a quantity of bitcoin. The
Bitcoin Network and Bitcoin Network software programs can interpret the
Blockchain to determine the exact bitcoin balance, if any, of any public
Bitcoin address listed in the Blockchain which has taken part in a transaction
on the Bitcoin Network. The Bitcoin Network utilizes the Blockchain to
evidence the existence of bitcoin in any public Bitcoin address. """

This is not entirely accurate - it does not take into account the fact that
there is a non-zero probability that a transaction already recorded on
Blockchain is later removed from the canonic Blockchain branch.

~~~
nicky0
It's a summary.

