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Winklevoss Twins Await Imminent SEC Decision on Bitcoin ETF

A bitcoin ETF could attract $300 million in assets in a week

by Olga Kharif, Bloomberg:

Tyler and Cameron Winklevoss will know within days whether they’ve won approval to begin offering their bitcoin-based exchange traded fund, with the digital currency’s record rally hanging in the balance.

Officials from the U.S. Securities and Exchange Commission met with the twins on Feb. 14 to discuss their proposal for an ETF based on the digital currency, according to a short notice of the meeting published on Feb. 22. A decision is due by March 11. The 35-year-old twins want to trade the security on the Bats BZX Exchange Inc.

An approved ETF would make bitcoin investing simple for small traders and institutions, while potentially boosting the digital currency just as it’s hitting new highs almost daily. Some $300 million could pour into a bitcoin ETF in its first week, Spencer Bogart, head of research at venture-capital investor Blockchain Capital, said in an interview.

“I’d be very surprised if it did anything but double from whatever levels it is at beforehand,” Bogart said.

Bitcoin was little changed in the U.S. Wednesday at $1,225.25 after rising to a record high intraday. It has gained 28 percent this year, as investors worried about global uncertainties and speculated on a more relaxed regulatory environment for the currency under President Trump. Hopes for the ETF have been a factor as well.

The Winklevoss Bitcoin Trust is one of three such vehicles seeking regulatory approval — and the advantages that come with being first. The others are Bitcoin Investment Trust, a creation of Barry Silbert, who had previously built a market for selling shares in private companies, and SolidX Bitcoin Trust.

Digital Asset Services, the sponsor of the Winklevoss ETF, declined to comment. Silbert and Ivan Brightly, chief operating officer of SolidX, also wouldn’t comment. The Winklevoss twins may be best known for accusing Facebook founder Mark Zuckerberg of stealing their idea for a social-media network, a case they ultimately settled.

Long-Term Edge?

SEC approval could give enormous power and riches to the winner for years to come. Just look at gold: SPDR Gold Shares ETF, started in 2004, has more than four times higher the market value of iShares Gold Trust ETF, started in 2005.

“This is the first-to-market race,” Chris Burniske, an analyst at Ark Investment Management LLC, said in an interview.


Cameron Winklevoss, left, and Tyler Winklevoss

David Paul Morris/Bloomberg

Trading bitcoin now is no easy thing. Investors have to open bitcoin wallet accounts, then purchase bitcoins via online exchanges. Or they can invest in Bitcoin Investment Trust, which trades over the counter, often at a hefty premium to the cryptocurrency. A last possibility is Ark, which operates an ETF with 5 percent exposure to blockchain — the database technology underlying bitcoin — and peer-to-peer computing.

With a publicly traded ETF, small investors could just call their brokers or buy shares online.

Approval is by no means certain. On BitMEX, a contract betting on approval of the Winklevoss Bitcoin Trust spiked to an all-time high of 70 percent on Feb. 28, before crashing to 53 percent on March 1. Neena Mishra, director of ETF Research at Zacks Investment Research, pegs the chances at 40 percent.

Regulatory Question

The biggest unknown is whether the regulators will conclude that bitcoin, a digital currency created on and managed by computers, lends itself to being a part of an ETF at all. Whether it’s secure enough, for example. Exchange Mt. Gox had many of its bitcoins stolen several years ago. Last summer, a project running on a blockchain technology similar to bitcoin’s got hacked and lost millions of dollars of investors’ funds.

Read more: You Can Bet On Whether the SEC Approves the First Bitcoin ETF

Bitcoin has similarities to currencies, as well as commodities like gold — since there’s a limited number, it could be considered a scarce resource. What ultimately matters is how the SEC sees it.

“Bitcoin is not a stock, it’s not a bond, it’s not a hard asset like precious metal, it’s not a commodity future,” Ben Johnson, director of global ETF and passive strategies research at Morningstar Inc., said in an interview. “It’s a technology that’s very much in its infancy, and it’s not something that in my mind lends itself to being packaged as an ETF.”

An SEC rejection of the Winklevoss proposal could help one of the other bitcoin ETFs seeking regulatory approval to get the nod this year by making the agency’s concerns public and allowing them to adjust their proposals accordingly.

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4 comments to Winklevoss Twins Await Imminent SEC Decision on Bitcoin ETF

  • Windrunner58

    The Twinkies must be grinding their teeth. They could have had this done a year ago when the price was around $300.00 and they would be rockin and rolling today with the price around $1200.00. F**king regulators (controllers) I am sure if this was a fund that supported the Clinton Foundation it would have been rubber stamped and they would be stealing little old ladies money at a record pace. Bastard Government!!!

  • rich

    Thinking of Russia as the single, great remaining nation of what was once “The West”, I thought that the Russian people would also welcome, with great joy, the possibility of putting their savings into silver money. I still think this is possible, and I put my thinking into a series of articles dealing with the monetization of the silver ruble coin. I had planned to present these articles at a meeting of the St. Petersburg International Economic Forum – SPIEF – in June, 2016. However, on account of illness it was not possible for me to be present. I do not wish to continue to harp upon the proposal; I presented my thoughts, and they are surely in the hands of responsible persons, and I must defer to their judgment on a matter which affects Russia internally, however much I believe in the value of my proposal. Perhaps – after I am gone – my proposal may be put into effect in Russia.

    As a postscript, now that Mexico is in grave problems, due to the tempestuous decisions of Mr. Trump, our Congress has revived – motu propio – of its own accord, the proposal of a monetized silver coin for Mexico.

    The national indignation at the treatment the Trump is giving Mexico, has produced a wave of national feeling that may, perhaps, give life to the proposal of a parallel currency based on the silver coin as money.

    I think it would be a master-stroke of “asymmetrical” politics, and would elevate to the skies the prestige of Mexico around the world.

    Many millions of Americans who have been saving large amounts of silver coins would be thrilled to hear that Mexico had monetized a silver coin.

    We shall see what transpires in the coming weeks and months.

  • The Truth

    I don’t know how good an ETF would be for the exchanges of bitcoin. Seems like these things are created to control the flow of money into the actual exchange. ETF seem to never be good for so called independent money. See how well ETF’s did gold and silver.

    • Windrunner58

      Just think for a moment. Gold is apparently trading at 300-1 paper contracts per ounce of Gold. IF…the rule of law of just, everyone could demand their ounce of Gold for their contract, the markets would collapse within seconds.

      And now they wish to include BTC. Great for the Twinkies, but as for the market, I am not qualified. I believe in BTC, but 300-1 would put the price of BTC into a stratosphere not known to us. Remember that BTC will only ever been delivered at a finite amount. Paper markets are meant to continue to increase with no cap. Unbelievable. Gonna be a mess!!!

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