Bitcoin just went from a high of 1327.1926 to 995.9575 in the blink of an eye.
Wow.
From the ruling....
> First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated.
> Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated.
I'm not sure I entirely understand if they mean that Bitcoin itself must be regulated or just that the SEC needs to see that the major exchanges are regulated.
If its the former, then I think this is game over, if its the later then............hmmm I really don't know.
EDIT Having gone through the ruling it looks like they have a few reservations.
1) Most of the bitcoin trading happens on unregulated markets
2) Most of the volume happends in China and not the us and is therefore hard to regulate.
3) The ETF is tied to the Winklevoss own Gemini exchange which has little volume and often inferior pricing to other more liquid exchanges.
4) They bring up the lack of a liquid futures market, though I'm not sure this is really a concern.
> The Commission has, in past approvals of commodity-trust ETPs, emphasized the
importance of surveillance-sharing agreements between the national securities exchange listing
and trading the ETP, and significant markets relating to the underlying asset.
144 Such agreements,
which are a necessary tool to enable the ETP-listing exchange to detect and deter manipulative
conduct, enable the exchange to meet its obligation under Section 6(b)(5) of the Exchange Act to
have rules that are designed to prevent fraudulent and manipulative acts and practices and to
protect investors and the public interest
So until bitcoin markets are regulated by the SEC or similar no ETP/ETF products I suppose.
I'm a bit disappointed that there is no ETF but this is pretty darn reasonable.
>Bitcoin just went from a high of 1327.1926 to 995.9575 in the blink of an eye.
That is a loss of 25% of its value. This announcement does nothing to hurt the utility of Bitcoin or its application as a medium of exchange. That drop certainly seems like a speculative investment bubble popping.
Update as of 11 March 01:44 UTC (4h43m after the SEC decision): BTC fully recovered!
It now stands at $1140, which is the level it was trading at just 2 days ago. From 09 March 00:00 UTC to the SEC decision on 10 March 21:01 UTC it gained +12% due purely to speculation ($1140 to $1280) and basically retraced these 12%:
http://bitcoincharts.com/charts/bitstampUSD#rg10zig30-minzcz... I am impressed. I thought downward trading pressure would have lasted for days/weeks after the SEC rejection.
It's not minor. If the ETF were approved, billions of dollars would flow into bitcoin through the retirement funds, which now can't. So that +25% was baked in, that was the expectation of the appoval. Lots of people were hoping for it. Oh well.
I am not sure why you put the word currency in quotes. There have also been many state issued currencies that have done similar - see Thai Baht, Argentine Peso, Russian Ruble, Venezuelan Bolivar etc.
Volatility isn't the issue. Bitcoin isn't technically a currency because it can't currently be used directly to pay public debts or taxes in any nation state. Bitcoin is just another commodity like copper or crude oil.
Actually, GP is discussing legal tender, which is not the same thing as fiat currency. Commodity (both specie or representational) currencies have historically been legal tender, in addition to fiat money (which is the modern norm for legal tender.)
Not a public debt or tax, and it's noted that this doesn't "legitimize" Bitcoin in the minds of the authorities, but looks like Norwegian prosecutors recently demanded the penalty for one criminal act to be partially paid in Bitcoin:
I understand the quoting now, thanks. I agree with you that its not technically a currency since it's not issued and circulated by a government but I disagree with the OP that it is not ready to be a "store of value" because of a single volatility event.
There are many who would argue it is a good store of value since it can't be manipulated by the issuing state's monetary policy or susceptible to the poor fiscal management of the issuing state.
There have been many volatility events. Given that governments have the ability to practically outlaw it if they choose, that makes it quite risky as a store of value.
Several of the major volatility events in the past of bitcoin were related to Chinese government announcements or rumors regarding regulation/legality.
Sure one can transfer bitcoin without governmental approval (or against restriction), but that annoying need to convert to and from fiat in order to trade for other goods and services means that the governments still have a great deal of influence over bitcoin.
Sure but I was speaking to the OPs assertion that this particular event is proof that it is not suitable as a store of value.
>"Several of the major volatility events in the past of bitcoin were related to Chinese government announcements or rumors regarding regulation/legality."
Right but this is to be expected given that China recently has been the largest market for Bitcoin by volume no? [1]
>" but that annoying need to convert to and from fiat in order to trade for other goods and services means that the governments still have a great deal of influence over bitcoin"
Is that any more annoying or any more inconvenient than having your hard-earned savings devalued by your government?
> Is that any more annoying or any more inconvenient than having your hard-earned savings devalued by your government?
I wouldn't recommend holding fiat currency as savings, except for perhaps 2-3 months of salary equivalent in case of emergencies. The rest should be stored in other assets based on your risk profile.
But it is currently a fact of life that we must exchange our cryptocurrency for fiat if we want to buy goods and services most places. While the number of merchants accepting bitcoin is growing, it's still quite small compared to the number of merchants who take local currency.
Just to expand on the point: there's two models of currency: fiat and commodity. Commodity money is obviously linked to an existing commodity, and suffers from massive swings since there's no way to insulate it from "news". BitCoin, of course, isn't backed by a commodity, so the natural thing is to assume it's a commodity in an of itself. The "mining" terminology supports this view, obviously. As a commodity, it most closely resembles Gold, in that its value doesn't seem closely correlated to the value one can extract from it through industrial use.
Fiat money has its plusses, though. Directly related to the fact that governments _can_ manipulate them is the possibility of reputational currencies. Here, a state has managed its fluctuations and taken actions when prompted for sufficiently often that "news" affects them much less than commodities, since the markets assume the state will act well before it becomes an issue (this also damps good news, since to a certain effect the good news was "expected").
A good study in this phenomenon, and how to break it, is what's happened to Britain since the referendum. It has lost a lot of value, obviously, but also its volatility has gone sky-high.
Going back to OP's point, a well-managed fiat currency can be a better store of value than any commodity. Entertainingly, Sterling has lost a similar amount of value to BitCoin, but it took much longer and is regarded as a disaster. Although, like BitCoin, you'll be able to find fans swearing the exact opposite.
There were two separate events, adding up to 25%. The first happened instantly as the Brexit result became known. The second happened on Oct 7 at the opening of trading when there was nobody around who wanted to buy...
I find that Bitcoins are an effective hedge against conventional wisdom.
Great stuff in the sense that one person can directly profit to the tune of a billion dollars, by manipulating currency markets, at the cost of the taxpayers of an entire nation. So, not great stuff at all.
He did not manipulate pound. UK government manipulated it by locking the exchange rate that did not reflect the fundamentals. Pound was doomed, Soros just profited from the crash. So, yes, great stuff - government should pay for its stupidity. Unfortunately they pay with our money...
He shorted the pound enough to move the market significantly, and his buyback strategy deliberately prevented any stabilisation. The crash wouldn't have happened or at least wouldn't have been as bad without his involvement.
a good overview of the origins of the crisis. how politicians for their own shortsighted gains made one poor decision after another and led the country into financial crisis.
Well, it can't compete with the USD. But plenty of nations like Venezuela have citizens that would happily take a >25% haircut to escape their governments capital controls. When Greece went bankrupt, life was much easier for anyone with Bitcoin than for anyone without it.
As many issues as Bitcoin has today, it has clear use cases.
>When Greece went bankrupt, life was much easier for anyone with Bitcoin than for anyone without it.
How? Bitcoin atms were basically non-existent there and from what I read on /r/bitcoin at the time from Greeks no one there was accepting it in stores.
There were capital controls restricting more than 100 euro worth of withdrawals from banks per day. Sure it's not helping you if you are buying a coffee but if it's saving parts of your pension that you worked your whole life to earn then it becomes very important.
>There were capital controls restricting more than 100 euro worth of withdrawals from banks per day.
Yes and bitcoin didn't help this since the ways to get cash for your bitcoin involved international transfers which exposed you to those restrictions.
>Sure it's not helping you if you are buying a coffee but if it's saving parts of your pension that you worked your whole life to earn then it becomes very important.
I'm not sure what this has to do with the question above. Could you expand on it some more?
I sent someone in Venezuela about USD 40 in Bitcoin in October or November. They were able to convert half of it into more local currency (Bolivares?) than they made in a month at their full-time job.
He said physical US currency was at a huge premium in the country because there wasn't nearly enough of it to go around, and the official exchange rate was clown shoes.
First up the government there have already started arresting the mining operators so probably no longer looking like that wise of an investment on their parts.
Other than that it's a much safer bet in Venezuela to buy USD than bitcoin though and that is generally what happens.
If you're poor in a country with a government like the Venezuelan one betting your limited funds on a speculative investment that requires an active internet connection to use doesn't seem wise or helpful.
Black market currency exchanges if you need to convert otherwise you just take payment in USD only and basically treat it as your currency instead of the Bolivar.
995 is the lowest price it was sold for, not the bottom of averaged price. If you look at graphs now, you'll see that price is considered not having been under ~ 1050.
Those kind of statistical anomalies happen all the time, you must be aware of them if you look at real time chart. The bottom line is that you can't really know what the price is before a 30min period ends.
That being say, I expect the price to go down further after a bounce (disclaimer : I'm not a financial adviser, this is an opinion). Bitcoin was already at its all time high, and then there was the rumor of ETF, promising it will go even higher and will reach the moon. That's a big red flag to me. What seems the most plausible to me is that it will now enter a downtrend until it finds its support, then only start a new uptrend. I may be wrong, but at least I won't loose money.
I totally agree we can't use btc as a currency, though. I have a prepaid visa card that I can load with btc, but I only use it very rarely because it's annoying to have to look at chart to know when is the good time to load my card for this week's grocery. Things are settled, now, bitcoin is a speculative asset. It would be more interesting if cryptocurrencies like tether, which provide USDTether and EURTether, crypto currencies always indexed against their fiat counterpart, were finally available at scale.
You must be unfamiliar with financial markets. Many assets have lost 25% in minutes and still considered perfectly acceptable store of value: stocks, commodities, etc.
Don't forget the euro a couple years ago reached parity with dollars in a couple months and people like ma that were saving to emigrate got thousands dollars in flames.
Eehhh, I've been skeptical of Bitcoin in the past because of its volatility, but this is very unusual. It's been rather stable on a week-to-week basis for a long time.
The SEC declining to approve some investment vehicle is not unusual at all. Compare that to the USD, where nothing short of global nuclear war is going to cause a 10-minute 25% swing.
On 2001-09-11 gasoline tripled, food doubled, and bottled water as much as quadrupled or quintupled in dollar pricing in parts of the US in less than a day.
Yes, there were in fact $4/gallon, $5/gallon, and even $8/gallon gasoline and diesel prices posted, many by noon. This also increased the price of everything shipped by truck for a while, too.
Prices came off that peak quickly, but took months to years to revert completely.
Well, to be fair, the value of the dollar is determined by its buying power. If goods widely increased in cost, then the effective value of the dollar has decreased.
Not saying that's what did or didn't happen on 9/11, though.
Yes, if all goods widely increased in cost (or at least, most). If it's only the goods that people buy in anticipation of (e.g.) a catastrophe, or goods that rely on those aforementioned goods to be manufactured and/or delivered, then the above comment is correct.
Gas prices actually dropped in the months after 9/11 [1]. Any place that was charging $8 per gallon day of was guilty of price gouging. Either way, you are comparing an SEC decision to the aftermath of the largest terrorist attack in history. Don't you think the scale of these two events is a little different?
Not to mention the relative consolidation of players in China. Some reports have suggested that well over 51% of mining hash power is consolidated amongst three organizations in China. My last look didn't agree with that number, but still it appears that it may be much easier to control consensus than was intended.
Thus, "anything can happen" if a few key players agree behind closed doors and change the rules.
I think bitcoin is a quite useful transfer platform, but I think it would be foolish to store much of one's assets in BTC.
Note that pools != miners. A pool might set the policy for their blocks, but miners can swap pools whenever they feel like it. Large pools have had individual miners abandon them in masses before.
True. Actually I was referring to the manufacturers of ASICs who are running huge mining operations. I'm not sure if they operate in their own pools or if they distribute their efforts across multiple pools. But they do have a critical mass of hash power.
Generally speaking, it's a bad idea to use currency as a store of value. The unwavering stability of the almighty US Dollar is a massive historical outlier. For most of history the wealthy didn't keep Scrooge McDuckian piles of cash around, they converted their cash into hard goods and investments like loans, which won't evaporate if hyperinflation occurs. Even today, the smart thing to do is to store most of your value in liquid and semi-liquid assets.
>investments like loans, which won't evaporate if hyperinflation occurs.
Loans absolutely will evaporate if hyperinflation occurs. Lets say you give a $1000 loan that pays out $2000 after two years and the value of the dollar drops 50% over the first year. You will still get $2000 in 1 year. Assuming the value of the dollar holds, you won't have made an actual profit. But what if the value of the dollar continues to drop? If you think its going to drop another 50%, you'd be better off selling your loan for $1000 now, in which case you've already lost half your value, assuming you can find a buyer.
Except it's not stable at all. If you hold USD long term, because of the inflation target of the FED, you'll be able to buy less and less. USD lost a massive amount of value in the previous century alone, despite the massive advances in every field of human activity.
You actually want https://www.measuringworth.com/uscompare/ for the index – as https://www.measuringworth.com/uscompare/relativevalue.php which is the calculator results page. (And it was coded by an Ohio State University college student when it was on EH.Net, before being maintained by me as a college student, before being transferred over to Sam Williamson's personal-business site about ten years ago where it is now – a transfer which I always thought was weird but that's academia for you apparently... regardless, it explains the code quality.)
Yes it is stable, inflation is a small steady largely predictable thing, that's what stability is, predictability. By contrast, Bitcoin is highly unstable, no one has any idea what it's value will be in a week, let alone 30 years down the road, but due to the dollars stability you'll have no problem finding 30 years loans denominated in USD. The USD is the very definition of a stable currency. Stable doesn't mean never losing value, it means being predictable enough to plan for the future.
Unless they were storing that value on MtGox or one of the many other early exchanges that were robbed. Or if they themselves got hacked as happened in many cases.
I suspect you could probably put all the people in the world that got rich from buying at $1 and holding in a school classroom together for a chat and not be very crowded.
It clearly reduces some of the potential future value of Bitcoin, and predictions of future value are baked into the current market price. I guess you could consider that under your definition of "speculative investment bubble," but it really applies to any market price of anything.
The only way it reduces its future potential value is by making it harder to speculate on its future potential value. Nothing about the currency actually changed.
If an official decision from the agency that regulates financial assets for the most powerful economy in the world doesn't count, then when does "something about a currency actually change"?
- being a truly global currency for irreversible online transactions
- being a currency that's easily programmable
That's the three main use cases for Bitcoin. There are contenders for #1 (Monero, Dash), and for #3 (Ethereum). For #2 it's still the easiest because of the huge network effect behind it.
Traditional currencies can't compete with crypto for neither of the space. They are attached to systems that prevent transactions from being anonymous, global, irreversible or programmable.
There's nothing that prevents Bitcoin from being a good anonymous currency. It simply isn't.
Its design allows it to be pseudo-anonymous at best, while Monero, for instance, has anonymity built in. Therefore if one seeks a truly anonymous currency they cannot possibly find it in Bitcoin.
Brexit had real world impact on how the currency would be used in the future and the strength of the economy of the country that stands behind it. The SEC decision does none of that.
That's because Bitcoin isn't directly tied to any economy. But just as Brexit had a real world impact on the pound, the SEC decision had a real world impact on bitcoin: It is directly tied to how people perceive Bitcoin, which is an import aspect just as well.
It is more a reflection of the instant liquidity available on exchanges. A more accurate description would be that the price went from about $1250 pre rejection announcement and has settled at around $1190-$1200.
Look at the price now. I would encourage anyone trying to read into the future of bitcoin based upon daily min/max to learn about the difference between day traders and hodlers. At this point, hodlers have been through so many scares that there is very little left that can weaken their hand.
The volume this week is actually down. It is only a handful of people trying to intentionally spike the price, and trade off the news to turn a daily profit. The only suckers are other day traders, and hodlers actually suckered some of them by buying in the dip they created.
But the ETF isn't going to distinguish between day-traders and long-term holders. In particular, Gemini's price was also in the $1300s before the news, and dropped significantly. If Gemini was giving the hodlers' price, that would be different.
If a handful of people trying to spike the price and trade off the news can cause BTC-USD to be 30% more than what it "should" be (i.e., what the price would be in a high-information, high-liquidity, low-shenanigans market), then the SEC is absolutely correct to say that the ETF is too wild to be approvable at present.
For comparison, on June 24 (Brexit), GBP-USD fell from about $1.50 to about $1.35, a 10% drop, and that was (IMO) much more significant news about the long-term future of the pound.
When the Winklevoss twins became aware of BTC (or at least shortly after they started talking about it publicly), some classic market manipulation ploys began appearing.
It could be coincidental, but I've always been suspicious that the Winklevoss twins were the first people of a mind and with the capital to start gaming the BTC market as one can any other financial institution.
The Winklevii are not people I'd like to distantly do business with.
> some classic market manipulation ploys began appearing
Cryptocoin markets are a haven for scams and manipulations. When I was into it I was hearing of a new scam almost every week. I don't think there is any correlation with Winklevoss let alone causation. Unless you have some evidence or references to present?
Very different actually, the stock markets are highly regulated. If you get caught dealing with penny stocks or insider trading you go to jail. One of the reasons the SEC didn't approve this ETF was because of the lack of regulation on exchanges.
Back when bitcoin was pennies, I bought BTC and then listed a bunch of nonexistent desirable drugs shipping from a convenient location for sale on the silk road, then dumped the BTC a few cents higher, without ever taking an order.
I only made a few bucks, but I was curious if it were possible then to move such a tiny market. It was.
I don't look at bitcoin as a currency I look at it as a fungible reserve like Gold or a Rolex. Both of those things usually appreciate in value, especially in uncertain times; I'll be using this price decrease to buy more I think.
Even worse than that. You are not allowed to re-melt your piece of gold if that item has a serial number on it.
Basically most smiths run an official registry. Even though a gold bullion is yours, most countries will forbid you from melting it into something else and destroying serial number in process, just like even if you own your house you cannot set it on fire. There are penalties including jail time. Its irrelevant if you put same serial number back on remelted PM.
But theres a cost in re-minting the gold into a bullion, which if its the way of consumption that takes more demand it would end up costing more.
Its obvious whatever that such rules can hardly be enforced.
Sidestory:
Argentina had an issue with inflation making coins worth less than their metal, and the bus lines (which were coin operated) turned out to be hoarding coins for reselling.
Gold actually has practical applications. Just go to wikipedia and find out what part of the CPU of the computer you are using to write your comment upon is made of.
The price of gold doesn't come from it's practical applications, so that's hardly relevant. If gold were no longer hoarded by speculators as a store of value, its price would plummet massively as the practical application demands simply couldn't maintain its current speculative value.
Bitcoin has practical applications as well, on the Internet as peer to peer cash. But like gold, it's value comes largely from speculators, not its practical applications.
Ehhh, I call BS. If for some reason all of a cities property records were lost, they would rebuild them via community testimony and consensus at worst case. Which clearly demonstrates it works in the opposite direction of what you are implying. Also property ownership tends to have inherit utility, something bit coin does not.
Bitcoin has inherit utility in allowing immutable and globally accessible data storage, people assign the rest of the value to it. Just like property, except if people with bigger guns come it doesn't matter as it will become theirs if they want
It's also highly mobile, unlike property. You can easily move more than 10k euros in BTC on a storage medium across borders without declaring anything.
In highly uncertain times, for example when civilization would be reverted back to the Middle Ages or a Fukushima/911 event, bitcoin would be of lesser use due to lack of an Internet connection. People need food and water in those circumstances, not bitcoin or Rolexes.
Yes because you're going to survive an event like that; the Fukushima and 911 references don't make sense because you clearly don't understand what I was talking about. I'm talking about being able to have a reserve that can be converted easily into something useful (fungible) so bitcoin in these events might not be useful but nor would gold or a Rolex. I'm just stating why I think Bitcoin price will continue to rise even though it's not a currency.
Competition between exchanges based on rules (e.g. paying liquidity takers versus makers) and surveillance (e.g pits versus dark pools or tape delays) has existed for a long time (think: American Stock Exchange versus NYSE versus NASDAQ) [1]. It sped up after the SEC passed Reg ATS [2].
The drop started at the exact time SEC made the announcement through their web.
Interesting part was, it went from 1250 way up to 1350 hours before the announcement making people feel someone bought on insider information but turned out that was some FOMO buyer.
I was trading right then sticking to the monitor for 8 hours straight waiting for their announcement.
This was etherium, which is also very interesting; etherium and BTC have been highly correlated over the last few months. I suspect that the crazy dip is just bots trading on that fact and the immediate correction is humans.
The next step seems to be to create a regulated market - anyone know what that means, or whether there is something inherent to Bitcoin that doesn't allow it? Coinbase has KYC, banking relationships and tax integration, I'm sure that can be extended to an exchange.
There is already a regulated market - the Winklevoss' Gemini exchange. They went out of their way to make sure everything about their exchange is in compliance, specifically for it to serve as the market for the ETF commodity.
Unfortunately for them, the SEC, quite reasonably, requires more than one regulated market to exist for the underlying commodity, and probably preferably not owned by the company behind the ETF itself. Seems obvious in retrospect.
> Unfortunately for them, the SEC, quite reasonably, requires more than one regulated market to exist for the underlying commodity
From the ruling, it doesn't really seem that was an issue. That Gemini does very little of the US and an utterly miniscule amount ogmthr global bitcoin trade made the surveillance agreement with Gemini insufficient, but a single-but-dominant regulated exchange would probably be sufficient.
An exchange that doesn't close shop on sudden market moves would be a good start. (Coinbase, which you mentioned specifically, was unreachable the whole time.) One that would honor all orders, in the right order, and with enough liquidity to make customers whole when they for some reason didn't, would be even better.
Then some proper options would be nice. Preferrably someone who doesn't trade against their own customers, which at least one exchange is open about. There's a lot that could be done in the Bitcoin ecosysten (well, at least we are rid of MtGox).
I would think regulated means the following: (Note that I don't believe this needs to be done by a government. It could be private.)
1. A governing body that can create rules and regulation for the market.
2. An enforcement body that can enact penalties for rule violations.
The problem I think is not so much the governing agency, it's the enforcement for rule violators. It's one thing to punish Mt. Gox for violating the exchange terms, but what if it's some shady anonymous bitcoin exchange broker in China?
> The next step seems to be to create a regulated market - anyone know what that means, or whether there is something inherent to Bitcoin that doesn't allow it?
It means commodity exchanges dealing in Bitcoin regulated by the CFTC or similar entities in other jurisdictions. There are some already, but they do a very small share of Bitcoin volume.
> Coinbase has KYC, banking relationships and tax integration, I'm sure that can be extended to an exchange.
That's money transmitter stuff, which is a different set of regulatory requirements.
Not "all" of the exchanges - I think the key is the term "significant markets". You need to have most people who do significant amounts of BTC transactions on regulated exchanges as opposed to everyone.
> You'd need to force all the unregulated exchanges to close down
No, you'd just need for the regulated exchanges to control a substantial share of the total volume of trade, which could happen by shift in trader preferences, unregulated exchanges becoming regulated, or, yes, unregulated exchanges shutting down.
That doesn't sound right. The etf is pinned to a single exchange (which they complained wasn't liquid enough) and there are thousands of informal unregulated gold markets all around the world.
> and block ability to run smart contracts or any other software on it.
I put a 50x leveraged short contract trade 10 mins before that at BitMex, and just before it plummeted, it quickly went up to 1327 and I got wiped out. So I didn't get to make a huge return!
Deep out of the money options have optionality whereas BitMex contracts are delta 1 products. They have literally nothing in common. The relevant difference in this case is that the option caps your upside.
As per SEC requirements, brokers are required to quiz you to makes sure you understand the risks involved in trading derivatives.
Furthermore, selling naked options (Level 3 access) without hedging or verticals requires certain capital and margin requirements, I do not think it is easily possible to get 50x levered in options alone - you'd probably need /ES futures for that.
well you don't know how much he lost. It could have been say $1000. Evidentally, the contract was designed to trigger a closure of the position when it dropped out. At a 50x short, an "investment" of $1000 would have yielded $10k on today's turn of events.
The irony here is that CME Group - which provides futures and derivatives - is waiting on the sidelines watching if an ETF like this could get approved and sustain a liquid market before providing bitcoin futures.
> I'm a bit disappointed that there is no ETF but this is pretty darn reasonable.
You can trade the OTC product with ticker GBTC [1]. It is a sponsored note - has quite a bit of volume on OTC markets. AUM is about 230mm. Expense ratio is around 2% (atrocious).
I noted that - before bitcoins drop on Friday afternoon - GBTC was up about 135% over 2 years - versus bitcoins 200% appreciation. So the tracking error is quite bad.
to be honest, creating an ETF exposes bitcoin to even more debt-backed trading, increasing the risk of bubbliness. In the medium run, this decision is probably "better" for bitcoin, since I think there is still trepidation about the realness, uncertainty, and misunderstanding about the market for the "intrinsic" value of bitcoin - a medium of exchange built on distributed trust.
A cryptocurrency that doesnt have the ability to go on a shared marked isn't reliable and is a true rupture between what institutions believe in and what the people share in common.
I'd say this is just a correction from over bought levels. Even better the correction is based on actual negative news, which is a sign of market strength (vs going down on no substantial news).
I'm saying perhaps it shows a sign of maturity. Don't get me wrong, anybody who thinks Bitcoin is a solid investment instrument as a whole is not informed. Bitcoin investing by definition is highly speculative and you should have an appetite to sustain massive swings.
> Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated. I'm not sure I entirely understand if they mean that Bitcoin itself must be regulated or just that the SEC needs to see that the major exchanges are regulated.
I'd challenge ANY government to regulate cold, hard, cash
It's not reasonable in the sense that the SEC should respond to the level of trader interest in BTC with something other than "don't trade it".
The SEC has a three pronged mission:
- Protect investors
- Maintain fair, orderly, and efficiently markets
- Facilitate capital formation
With this decision they missed on all three. No investor was protected. The BTC market today was not fair, orderly, or efficient. There was excessive capital destruction.
SEC isn't saying "don't trade it". They're saying don't register a security linked to it.
Registration means you're complying with certain laws. Those laws, in turn, make diligence easier for investors. If you remove those baseline expectations, marginal transaction costs go up.
> The Winklevoss ETF proposal was rejected because the SEC found that the significant markets for Bitcoin tend to be unregulated overseas markets that are potentially subject to price manipulation. But this creates a chicken and egg problem. How do we develop well-capitalized and regulated markets in the U.S. and Europe if financial innovators aren’t allowed to bring products to market that grow domestic demand for digital currencies like Bitcoin?
The SEC's job (relevant to the issue at hand) is not to make it easy to drive demand in the US on the hopes that that might create conditions for mature markets in $COMMODITY, it is to assure that exchanges listing derivatives of $COMMODITY have adequate rules in place to protect against manipulation, including manipulation of the derivative through manipulation of the underlying commodity.
If the key driver for domestic demand for the commodity is readable derivatives such that one needs to create such in order to drive demand, then, well, too bad.
If there is sufficient inherent utility in the underlying commodity, you won't need to violate normal exchange criteria to create derivative markets to stimulate demand for the commodity, the commodity will drive itself, and create the conditions where it won't be unduly onerous to create derivatives markets that meet the normal criteria.
It's easy. If your product practical application was actually more important than it's speculation aspect then price manipulation would be greatly reduced.
As bitcoin exists right now that's not the case of course. Bitcoin is now a mostly speculative asset since the amount of transactions you can do is extremely small compared to the market value of bitcoin at the moment.
This is somewhat false. It is true that Bitcoin can currently support about 7 txps. However, this isn't the whole picture.
1) A much better number to use is 4,500/10 minutes, because if the transactions aren't used in a prior second, they can still be used in the next.
2) One-way ratcheting timelocked channels (these payment channels work kind of like a giftcard) are ridiculously easy to implement -- basically just use this scriptPubKey:
```
OP_IF
<Bob's public key> OP_CHECKSIGVERIFY
OP_ELSE
<now+8 days> OP_CHECKLOCKTIMEVERIFY OP_DROP
OP_ENDIF
<Alice's public key> OP_CHECKSIG
```(from https://21.co/learn/intro-to-micropayment-channels/)
These only require two transactions total to send many transactions from Alice to Bob. Even as technologies like Lighting Network are further developed, which make these channels full duplex, institutions looking to get high volume trustless transactions through should have very little challenge adopting simpler channels now.
3) The number of transactions is completely separate from the amounts that can be transacted. Large value transactions move through bitcoin as easily as small, so even if the number of transactions were bottle-necked, this is still very useful for settling larger amounts with finality.
The ETF has been the talk of the town for the last four years, and it is not unreasonable to think that it has been holding the hand under the price, since to a lot of people it represented the coveted inflow of institutional investment into bitcoin.
With this gone, the immediate outlook for bitcoin is bleak. There is little market adoption to speak of, in fact bitcoin is probably losing market share, as the initial hype and attention grabbing announcements of bitcoin support have died down, and a lot of merchants have decided that the miniscule business it drives is not worth the trouble. Also, the network is straining even under the current load, leading to (much) longer transaction confirmation times and higher fees. The average fee for a bitcoin transaction is now almost one dollar - this rules out a lot of use cases that previously people would have said were ideal for bitcoin.
Which leads me to the even bigger problem: The bitcoin community and ecosystem is in a massive deadlock, between two sides that are equally rabid and antagonistic, and dividing the project down the middle, between the developers and the mining operators. Few outsiders likely know how bad it has become, but visit r/bitcoin and r/btc on reddit if you're curious. This would be concerning in itself for the future of the project, but it also means that right now no major updates can be made to the bitcoin network, because each camp runs a big percentage of the network and block any new initiative from the other side.
All of this makes me very bearish for bitcoin in the medium term. I am very sure that bitcoin has a future, but how long out that is, and how big it is, remains doubtful and could well be influenced negatively by particularly the issue of governance. Satoshi once said something like "in ten years bitcoin is either worth a huge amount or nothing". I'm starting to fear that might not be true - bitcoin could also become a small niche platform for a very limited set of use cases.
> since to a lot of people it represented the coveted inflow of institutional investment into bitcoin
I would say coveted inflow of retail investment. I don't think any serious institution would invest in bitcoin. The risk is too high given that the AUM can go to 0 instantly with one data breach.
So what are the expected benefits of a bitcoin ETF? Many of the traditional benefits of ETFs are obsolete when you can just buy and hold an equivalent amount of bitcoin
The biggest benefit I can think of is that some institutional investors have restrictions on the types of securities that they can buy.
Someone could solve this by creating a company to buy lots of bitcoin, and then having an IPO to list that company on a public market. Then pension funds would be allowed to buy it, Jane Doe could buy some in her IRA, etc.
Any reason this wouldn't be just as good as an ETF?
> Someone could solve this by creating a company to buy lots of bitcoin, and then having an IPO to list that company on a public market. Then pension funds would be allowed to buy it, Jane Doe could buy some in her IRA, etc.
You're repeating yourself. That is more or less what an ETF is.
Got it thanks, that makes sense. I guess I was expecting this proposal to somehow be more complicated, and didn't realize that the bar is this high for listing a company thats a bucket of X holdings.
> institutional investors have restrictions on the types of securities that they can buy
Those restrictions exist for a reason. Trading unregistered things over-the-counter, e.g. private stock or Bitcoin, carries unique risks. One of those is around fraud. Most investment funds aren't equipped to do fraud diligence (and benefit from not having to do it on ETPs).
I can imagine that custody was considered to be a good selling point. If you can get exposure to BTC through an ETF without having to secure your own BTC, there's significant value there. I.e., centralize security in HoldCo, sell shares in HoldCo to give safe access, share security expense and take a small piece off the top for your troubles.
So what are the expected benefits of a bitcoin ETF?
The expected benefit is that the Winklevoss twins can now cash-out the $11m+ of Bitcoins [1] on the backs of public sucke-... I mean investors.
There's not really any other immediate purpose for this ETF other than that, they've been working to build trust (a currency's only source of value) in Bitcoin for years now in order to add value to their own holdings; they will likely continue to resubmit the proposal [2] until they figure out a way to weasel things through. An ETF would be the ultimate stamp of trust and approval -- having the US gov't essentially validate Bitcoin via SEC approval means that $11m could easily turn into half a billion or more.
So if you have a rare-earth metal commodity ETF that can be dug from the ground in conflict areas and have exchange markets in these wild areas, would the SEC deny that commodity ETF then because they wouldn't have surveillance-sharing agreements with those markets?
Why would the exchanges be in the areas where the metal is mined? The London Metal Exchange seems to do pretty well despite the scandalous lack of zinc mines or steel mills inside the M25.
In this hypothetical situation, lets say it's because the countries that the occur in want a cut of the proceeds, so they force the sale of these metals to be in their country.
And instead of rare earth metals, lets say it's iron? Something that is mineable almost anywhere, kind of like bitcoin. So you would have exchanges with these agreements, but you would also have exchanges without the agreements.
It's interesting, based on the rest of the ruling, that they're not particularly concerned with any other aspects of it as a commodity (they acknowledge various interesting properties of it but note that those wouldn't themselves prevent them from approving this), but instead solely concerned that the rest of the Bitcoin market isn't controlled and monitored well enough for them to regulate activities on it.
The criteria of surveillance agreements with regulated markets for the underlying asset appears to be (based on the discussion in the paper) well established, clear in its application to the facts, and dispositive in this case.
That doesn't mean it's their biggest concern; regulatory entities (and courts) tend to focus on criteria that meet those qualifications over other because they produce decisions which don't require creation of substantial new rules/precedent, and are more difficult to challenge.
"The Commission believes that, in order to meet this standard, an exchange that lists and trades shares of commodity-trust exchange-traded products (“ETPs”) must, in addition to other applicable requirements, satisfy two requirements that are dispositive in this matter. First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated.
Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated."
I think it would apply to foreign currency ETFs, since the foreign exchange markets aren't exchanged-based. Foreign currencies aren't commodities though, so apparently it's completely different situation to a commodity like bitcoin.
Yet the price has only dropped around 80 dollars compared to yesterday. Not too bad. For a few minutes it dropped by around 250 dollars but it picked up quickly somehow.
The publicity from this, even though it was a negative decision, will be a hugely positive to the price in the medium term. For reference Go look at what happened after the Silk Road take down, or the Chuck Schumer news conference where he told the world he just learned how you could buy drugs for Bitcoin.
On the other hand, anticipation of the ETF may have been responsible for the last few months of increases from ~700-1250 USD. But that's pure speculation on my part.
This is a good thing for Bitcoin. The ETF rules in my opinion gave too much power to miners. The rules stated that the ETF would follow the chain with the most work after just 48 hours.
Miners need income, because mining is actively expensive. In the long term, this means they have to mine on the chain with the most valuable block reward. This means the economy really gets to decide the longest chain, not the miners.
But the ETF likely would have been large enough to tip the scales. Miners can stomach 48 hours of loss to push an agenda.
And it's probably not good to have such a huge portion of the economy in one place anyway. An ETF will make more sense when bitcoin has more maturity.
function generateBitcoinNewsReaction(oldPrice, newPrice) {
if (oldPrice > newPrice) {
return "This is good for bitcoin.";
} else if (oldPrice < newPrice) {
return "This is good for bitcoin.";
} else {
return "The price is stabilizing; this is good for bitcoin.";
}
}
function generateBitcoinSkepticism(oldPrice, newPrice) {
if (oldPrice > newPrice) {
return "It was a bubble all along.";
} else if (oldPrice < newPrice) {
return "Deflationary currencies can't work";
} else {
return "The market cap is too low to support a stable currency";
}
}
In summary: "First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated."
I very much agree with SEC's decesion, just for other reasons.
The usuall ETFs are baskets of bonds, stocks and commodities. Regardless of the level of volatility, they are all priced per the capacity of those stocks/bonds/commodities to create economical value. That means you have a solid economical logic to price them. Of course, supply and demand impacts the price, but even if no one wants to buy a certain stock, that stock has a marketable value. You can take the assets of that company, sell them and divine the cash by the number of stocks out there. Without going to too much details, I fail to understand how bitcoin can be treated like a stock/bond/commodities? Bitcoin value is purely based on the supply and demand forces. Without supply and demand, bitcoin has no value. On its own, it has no value generation power and therefore cannot be compared or traded like a stock, neither can be packaged into an ETF.
As much as I do not like to agree with SEC, this one is a right decesion!
> First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity.
> And second, those markets must be regulated.
So, essentially: bitcoin does not and can not satisfy these two conditions (nor can any other such scheme) and therefore you can't trade anything that is directly or indirectly representing bitcoins.
Something useful like bitcoin etf gets rejected. But look at some of the stocks that are allowed to trade...
Magnegas for example has been an ongoing fraud for 17 years.
Fake delivery of machines to Kazahkstan. It would be easy to prove this a fraud but the SEC does not care.
Funny you should mention it, as legal judgements are not the sort of thing I normally have reason to read. However (copyright troll) Prenda Law's 9th Circuit appeal on sanctions came up in discussions on HN a couple of days ago and, having watched the humorous video of the proceedings, was curious as to the outcome, so tracked down the ruling [1]. It was similarly well written.
As a lay-person I've come to expect convoluted legalese as found in contract terms, but where those are typically designed to bamboozle and obfuscate, or at least keep corporate lawyers employed decoding and negotiating each others writing, judgements and rulings are designed with the opposite goal in mind. If you are potentially creating case-law, it better be clear what you have decided and why.
This seems to be a victory for bitcoin. Why would a government entity know what to do with a purposely designed non governmental decentralized currency? Especially a profit seeing ETP loaded on top with 0.xx% commission? It's ludicrous to imagine the SEC jumping on this train, BTC will outlive them. As for the Wrinkles twins, they are profit seekers, nothing more. The purpose of a decentralized currency is to be a decentralized currency, enabling peer to peer outside of sovereign intervention economics. This is a non sovereign movement regulated by supply, demand, peers sprinkled with occasional robbery here and there. This digital currency which will outlive many sovereign states that currently exist.
Can't they just file in another country? I mean, it doesn't really matter where it's traded; any decent bank will give you access to at least the LSE and Xetra in addition to the two big American exchanges.
US 401k / IRA accounts can, and do, buy stocks in a variety of markets, whether directly or through instruments such as NYSEARCA:VEU (also available as the mutual funds VFWAX and VFWIX.) I'm not aware of any special reason why foreign-traded ETFs would get special treatment that foreign-traded stocks don't?
There is another proposed ETF being ruled on in a couple weeks:
>"The Commission, pursuant to Section 19(b)(2) of the Act,9 designates March 30, 2017 as the date by which the Commission should either approve or disapprove the proposed rule change."
Can someone please explain to me the logic in treating Bitcoin as an investment vehicle? I get that fiat currencies are traded like equity, but this is not that. I also understand that there is a huge potential for short term gains, but the risk is just as great for a total loss.
Bitcoin is a means of transferring wealth. It is a tool, not a commodity. When are people going to stop this speculation and treat it as such?
The Bitcoin markets don't have to be regulated for this ETF to be tradable. The Winklevoss could still list their ETF on the OTC Markets and anyone with a brokerage account would still be able to trade it. There's already a Bitcoin Investment trust that is currently tradable on the OTC market though as one commenter mentioned it's currently trading at a premium.
Could someone explain what a Bitcoin ETF is? My understanding is that ETFs are like index funds, which group other stocks into one basket. There's only one Bitcoin though, so what would a Bitcoin ETF collate? The "Description of the Proposal" didn't really make that clear to me.
ETFs group arbitrary assets into something that can be traded like a stock. So the closest comparison would be something like a gold ETF, which lets you buy and sell something like you would a stock with gold's approximate price. A Bitcoin ETF would let you buy and sell something like you would a stock with Bitcoin's approximate price.
It's basically a wrapper class that lets people interact with things as if they were stocks.
Here's the basic thing: Bitcoin is fatally flawed. Is it meant to be a payment method (in which case an ETF or otherwise treating it as an investment vehicle is roughly as nonsensical as having an ETF that deals with blank checks) or is it an investment (and if it's an investment, what on earth are people investing in?). The volatility of Bitcoin plus the constrained supply leading towards upwards pressure on the price of bitcoins mean that it's a deflationary currency and deflation is a bad thing as it creates an incentive to not spend. This means that the only real reason to spend Bitcoin or otherwise use it as a payment is for situations where that's the only option and right now, and for the foreseeable future, that means assorted illegal or at best borderline illegal products, which gives it a halo if unrespectability that the Winkelvoss twins are not going to erase. Perhaps a blockchain-based cryptocurrency might in the future resolve these issues, but otherwise it's a doomed product that I wouldn't put a single penny (or watt of household electricity) into.
What, why? Positive interest rates are meant to compensate FOR inflation. Because there is inflation, people can't just hold onto their money in cash; they have to put it into an interest bearing account in order to not lose money over time. Keeping your money in a bank account is NOT the same as hoarding a currency, because the money in a bank account is lent out to other people to spend. Money in a bank account is still participating in the economy.
Bitcoin investors are not like this; they are holding onto the money in hopes the value goes up. The bitcoins they are holding are not being used for any financial transactions. Those bitcoins are essentially out of the economy while they are being held. This is bad for an economy, when the currency is more valuable as an investment than as a vehicle for economic transactions.
This is not how it works at all. Holders/ "hoarders" of Bitcoin do not decrease the utility of the network one iota. Because there is infinite divisibility, if I want to take some fiat and move it to another place via the network then return it to fiat at some arbitary price at a point in time, the fact people are holding (even if 99% of all Bitcoins were locked up) makes no difference to the utility of the network. All that has happened is that the decimal point has moved.
What is happening is that supply is reduced. Demand has presumably remained the same as it otherwise would have been, and as a result the price rises. This is great for people holding, and it encourages more saving - but the rising tide is lifting for all boats here.
For you who is just temporarily utilising the network, the fact that the price of Bitcoin might be ludicrously high (in your opinion) doesn't change the fact that you can utilise the advantages of a decentralised liberated money for your wealth movement at the same cost that it would have been if Bitcoin were at a low price.
> Is it meant to be a payment method or is it an investment
Ideally it should be both.
> This means that the only real reason to spend Bitcoin or otherwise use it as a payment is for situations where that's the only option and right now, and for the foreseeable future, that means assorted illegal or at best borderline illegal products
There are plenty of legal products you can buy.
> Perhaps a blockchain-based cryptocurrency might in the future resolve these issues, but otherwise it's a doomed product that I wouldn't put a single penny (or watt of household electricity) into.
The only real issue you're pointing out is the finite supply (volatility will sort itself out in time) which for example Monero answers with a "tail emission" meaning there is an ever increasing amount of coins.
It protects you against hyperinflation. It also protects the innocent from having their funds unfairly seized. It puts you in control of your money in a way that no other asset can.
Bitcoin's biggest use case is as an emergency fund. People in Venezuela who bought at $1200 in 2013 were still doing comparatively well when the price was $200.
If oppressive capital controls crack down in a nation like Turkey, Bitcoin can protect you.
Bitcoin is excellent for protecting yourself during financial emergencies. High volatility is acceptable in these situations. Some money is better than no money at all.
I think your logic is flawed. You're saying bitcoin's deflationary nature is bad and then proceed to talk about how volatile it is and the bad vibe that it carries BECAUSE it keeps going up in price so the only reason to spend it is for illicit things.
So then here's the controversy of your statement - if bitcoin is a deflationary appreciation-only thing - then maybe it's not as volatile as you claim and is fit to be used in EFT scenarios? Or if it is in fact volatile then maybe it's not all that deflationary in that it's value isn't bound to be going up indefinitely?
Which is it? :)
As a side note - yes, the mechanics of coin mining do make bitcoin "technically" deflationary, but just like any other "thing of value" this doesn't guarantee it's value in the "real world" to be mapped to that deflation 1-to-1. There's a finite supply of gold or oil out there for example - their prices however are bound to fluctuate quite a bit...
Nothing you've said about Bitcoin is new, and yet it's been around for half a decade now, and the price is still in the $1000/coin range. At some point people are going to recognize that whatever it's used for, it has some value.
Bitcoin is a better medium of exchange than gold. It's trivially divisible, it can be checked against fraud and counterfeiting with a quick electronic test, and it can be sent around the world in minutes without the expenses usually associated with armed escort. If you're paying some random person in Venezuela a two or three figure sum, Bitcoin is better than gold, and probably more anonymous.
Gold is probably a better store of value than bitcoin. It's not a great one, mind you (the price is still too volatile). Its security can also be assured with physical protections that are easier for a layman to understand than bitcoin's electronic protections. Bitcoin has a small but nonzero chance of a total collapse in its value which gold will not face until widespread exploitation of asteroid-based mineral resources is commonplace.
Bitcoin is time delimited and finite whereas gold is finite. If major financial systems were to fail, the values of both would skyrocket, although bitcoin would make a better medium of exchange because of portability, in my opinion.
As usual in the bitcoin universe we are going to get a lot of people trying to explain you why something they were saying it would be so great for bitcoin until 1h ago, is actually a very bad thing for bitcoin and that this was actually the best possible scenario.
First time I've even heard of this honestly, but my reaction is sort of "meh". Might have been interesting had it gone through, but I don't see how it changes much of anything that it didn't either. The courts ruling seems fairly reasonable as well in that bitcoin is a relatively unregulated commodity (in as much as a currency not controlled by any government is unregulated) so I can't really say the ruling was unfair. Given a choice between increased regulation of bitcoin and allowing the exchange to go forward vs. keeping the current relatively lax regulation and no exchange, I'm of the opinion no exchange is the better option.
There's also the minor fact that a significant chunk of wallstreet already treats most of the bitcoin markets like commodity exchanges anyway. A significant driver of the massive instability in the bitcoin market is directly attributable to wallstreet treating bitcoin as a commodity. One possible upside of having an actual commodity exchange is that it might have helped stabilize some of that by decoupling the speculation from the actual bitcoin market a little, but I guess we'll never know at this point.
I wonder what assets are resistant to mass systemic failures arising due to calamities such as war etc.
Bitcoin: without the internet, it would be hard to transact
Fine Art and Gold: hard to carry around
Dollars, land, guns, alcohol?
I've just been trying out Coinbase recently and I'm pretty annoyed with them. For one, Canadians can't sell & withdraw money, and their buy/sell limits are ridiculously annoying. On top of this, their fees are very expensive and just right now, they have an outage in the middle of an important news. This is like failing at all the core important bits.
Is there a more serious thing than Coinbase that exists?
Coinbase/GDAX is incredibly unreliable during "big news" moments like this. Time and time again this happens, and they haven't quite figured out their scaling issue yet.
Tax avoidance on capital gains since it can be added to your IRA. Also it would allow bitcoin to be purchased from any trading station in the US rather than a website you have to sign-up for
imho it stabilizes and goes back to 1200. It surged from 2011-2014 without the ETF...Bitcoin is seen as a safe haven against global destabilization. A lot of money on the sidelines looking for a buying opportunity that has come
Exactly. The bitcoin market is small compared to other financial markets, 15 billion or so, but has potential to get much larger. In a world of negative interest rates, capital controls, and cashless societies, it looks pretty attractive. It's wealth that you control and own. When the next financial crisis comes (and in the face of low yields and record PEs), the asymmetries of money flowing out of these markets into Bitcoin will be a sight to behold. I hold some BTC. It's been a wild ride from the 200s. -10, -20% is just another day in Bitcoin world. yawn
In 2013, depositors in Bank of Greece lost 50% of their deposits above $100k, overnight, by decree. Not saying Bitcoin is perfect, but the alternatives are often not better.
yes not only was it in cyprus but it was 60% and in addition the rest of the 40% you weren't allowed to touch it, or more generally you need to submit around 3 forms to get funds from the money that is still there that you and i state this "used to own"
Yep. Was picking it to hit the 7's. Quite surprised. Still think it is going to move sideways for a few months though. But hey, I was wrong about the scale of the post-ETF drop, so maybe I'm wrong about that. By any measure, bitcoin has much more support than I thought it did.
it's much more liieky a country will default or fal ito chaos (5 countries nearly did in 2011 during the European debt crisis) than the internet suddenly ceasing to exist or being broken up.
> it's much more liieky a country will default or fal ito chaos (5 countries nearly did in 2011 during the European debt crisis) than the internet suddenly ceasing to exist or being broken up.
There are countries for which that may be true, but there are other countries with currency to hedge against those events.
When bad things happen, sometimes capital controls are introduced. This may restrict the ability for people in that country to purchase foreign currencies. Even in developed countries such as Iceland.
It's not the SEC's job to judge the value of the funds traded, but their compliance with SEC regulations. Your argument is like blaming the NYSE for the failure of a public company.
People that don't understand VXX talking about VXX is one of the funniest things on the entire Internet. For some good laughs, take a look at the comments section on this post: https://sixfigureinvesting.com/2013/04/how-does-vxx-work/
A choice quote from elsewhere on the Internet: "Write call spreads, collect $$$ when they expire... this worthless stock is a goldmine!"
Unrealistic security should be the only reason to disapprove of a bitcoin ETF governed by the SEC. Not only is it poorly suited for reckless centralization by thousands of indirect investors, but bitcoin as a whole would be setup up for massive government retaliation once the keys are compromised. MtGox x 10,000.
Having sold all of my bitcoin at ~800 at a small loss (a significant portion coming from commission fee( ~$150+ to convert low four digit USD amount of bitcoins to fiat.) I am paying attention to the bitcoin prices closely. As USD gains more interest it's going to put downward pressure on gold and bitcoin.
There's no way this is going to gain mass adoption by being this expensive.
More importantly, this signals strong government regulation in the bitcoin and cryptocoin industry in general. I wouldn't be surprised if we started seeing security laws being applied retroactively to all the scams like initial coin offering (like IPO but unregulated and heavily manipulated) on Bitcoin and Ethereum.
To the wary trend watcher, this is exactly what VC's feared and noted by the significant decline in VC investment in blockchain and cryptocurrency startups.
> There's no way this is going to gain mass adoption by being this expensive.
I struggle to understand what you mean. What sort of anchor are you using for how much the exchange rate should be for adoption? Cost of electricity, cost of mining equipment, cost of running a node? Satoshis are so abstract that "this expensive" seems irrelevant to everything except for historical rates.
Conventional wisdom on BTC is that one element that would improve adoption would be lower volatility and that in order to get that, the market cap would need to be much, much higher. Given the fixed inflation rate this usually suggests that the exchange rate has to be correspondingly higher.
Wow.
From the ruling....
> First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated.
> Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated. I'm not sure I entirely understand if they mean that Bitcoin itself must be regulated or just that the SEC needs to see that the major exchanges are regulated.
If its the former, then I think this is game over, if its the later then............hmmm I really don't know.
EDIT Having gone through the ruling it looks like they have a few reservations.
1) Most of the bitcoin trading happens on unregulated markets
2) Most of the volume happends in China and not the us and is therefore hard to regulate.
3) The ETF is tied to the Winklevoss own Gemini exchange which has little volume and often inferior pricing to other more liquid exchanges.
4) They bring up the lack of a liquid futures market, though I'm not sure this is really a concern.
> The Commission has, in past approvals of commodity-trust ETPs, emphasized the importance of surveillance-sharing agreements between the national securities exchange listing and trading the ETP, and significant markets relating to the underlying asset. 144 Such agreements, which are a necessary tool to enable the ETP-listing exchange to detect and deter manipulative conduct, enable the exchange to meet its obligation under Section 6(b)(5) of the Exchange Act to have rules that are designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest
So until bitcoin markets are regulated by the SEC or similar no ETP/ETF products I suppose.
I'm a bit disappointed that there is no ETF but this is pretty darn reasonable.