Comment by sneak | Hacker News Reader

Comment by sneak | Hacker News Reader

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Yeah, the whole public BTC order book on MtGox can be had right now for under $2mm USD. The other exchanges are smaller yet.

The market is very loud, but still very tiny. This will change, and it's good to start early, but I agree wholeheartedly that an ETF is premature.

This will not be the case in 12 months, though.

I think the biggest risk to a fund like this is data security. If you have more than 50k bitcoin sitting around, APT doesn't even begin to describe the measures people will take to steal your keys.

Their S1 specifically states that the fund is not holding the Sponsor company (holding the keys) liable should their proprietary Security System fail and the keys get hacked and the coins are stolen unless it was gross negligence.

This is going to be a bumpy ride for those who don't have a deep understanding of security surrounding crypto. Based on some of the technical mis-descriptions in this doc, I am tempted to speculate that they may not have the requisite understanding to fully model the threats they face. Then again, government paperwork takes months, and perhaps this is just an early step and they'll source all of that in the interim. (Hey, tall dudes: I've got 15 years of experience keeping private data away from super-determined hackers and other bad guys, and my email address is jp@eeqj.com! Get in touch!)

The filing says nothing about the details of their proprietary Security System.

Following that, the future of liquidity is a huge unknown void right now. I wouldn't be surprised if at some point in the next 12 months, there are no exchanges on which you could liquidate more than $50-$100k in bitcoin.

It's even difficult right now when everything is nominal - anyone who thinks buying a few million dollars in bitcoin is easy or simple has never even begun to try to do so.

"the whole public BTC order book on MtGox can be had right now for under $2mm USD"

No it cannot. Some people have placed sell orders at $1000, $10k, $100k, etc. To the point it would take trillion and trillion of dollars to buy up all BTC.

But you can be sure that if you tried to do this, a lot of other sell orders would pop up, making it effectively impossible to buy up all bitcoins.

> But you can be sure that if you tried to do this, a lot of other sell orders would pop up, making it effectively impossible to buy up all bitcoins.

Yes, at entirely reasonable prices, right? :D A substantially higher cost basis starts to cut into fund profits...

Also, a minor correction to your comment: the depth of the MtGox order book is public, and it was accurate at the time of my comment. It's up to $2.2mm USD to buy the whole thing now.

Whatever site you are using to see the order book does not show it in its entirety. It really is a lot deeper than $2.2M. I know for a fact because there has always been sell orders at ridiculous amounts such as 1 BTC at 1 trillion dollar.

For example bitcoincharts.com now truncates the order book (2 or 3 months ago it was showing everything, on the sell side at least).

Does the order book show all the "dark pool" trades? It surely cannot show all those who sit and wait (or have bots) for the price to change so they can move their ask price up.

The order book would show people who are sitting on either side of the market, so if they have a bot that's adjusting their quote it would still show it - unless I'm misunderstanding your question?

I think we're talking about parties who don't actually have an order in. Rather they have automated a process to enter orders in response to certain conditions. Depending on what those conditions are, you won't be able to rely on a continuous price trajectory.

Admittedly, I don't see how this is different for BTC than it would be for any other asset.

Those are not providing liquidity in a useful sense right now. Usually the measure is people prepared to trade at current bid or offer ie a very narrow measure. If you want to buy at 1% down that's not useful now.

So... if I put a sell order for 1BTC at $10 million, their number would go up to $12.2M?

I expect we'd see more liquidity on MtGox if they figured out how to write a matching engine. I would never add liquidity on a venue that routinely takes hours to process orders and cancels.

I have had a theory that most traditional matching engines can get away with lower latencies because they can multicast their marketdata.

It seems like sending out all marketdata events to each connected user over a tcp connection is bound to be problematic.

Perhaps they will add a collocation site where active Market Makers could receive multicasted marketdata with much lower latencies.

> Following that, liquidity.

There needs to be an effective method of shorting in order for the ETF to be effective. I think it will take much more than a year.

I don't follow that logic, could you explain it?

https://news.ycombinator.com/item?id=5975704

A thought occurs to me: Don't the twins own something like $10M of BTC? Perhaps they personally will provide liquidity for this ETF.

> * Perhaps they personally will provide liquidity for this ETF.*

That sounds suspiciously like "unloading".

Yup. They claimed they owned "1% of all BTC", without specifying if it was 1% of 11M (current amount) or 21M (max theoretical amount). But if it is 1% of the latter, then it matches perfectly with the number of bitcoins needed to back this ETF (1M shares * 0.2 BTC/share = 200k BTC).

That probably kills my idea, since to provide liquidity for the ETF they'd need to hold significant BTC outside the fund.

I'm no lawyer, but I'd be surprised if it's legal for ETF providers to seed their own fund. The need for authorized participants is rather important.

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