BIT Poised to Become Publicly Traded Bitcoin Fund
wsj.com
wsj.com
1) Barry Silbert's BIT has beat the Winklevoss' (or Winklevii) bitcoin fund to market by using a backdoor listing technique.
2) Finra granted its request for a permanent ticker symbol, GBTC, and that “is expected to be effective shortly.”
3) Each share of BIT is worth approximately one-tenth of a bitcoin. As of Friday, the trust’s net asset value stood at $24.43 per share.
Hmmm... going long bitcoin and shorting this may be the trade to do.
Some stocks are cheap to short while others could have high double digit interest rates. The rate depends on the willingness of people to lend and volatility.
Not sure what they're doing now (website is confusing) but when I interned there in 2012 they were a marketplace for all sorts alternative assets. They became somewhat well known when they made a deal with Facebook to be the exclusive pre-IPO market for Facebook equity. They made a business of helping private companies organize buying/selling of their shares. They branched out into all sorts of things including a gold fund, etc. So this seems like a natural move for Barry.
The other problem is that there is no creation process for publicly tradable shares. With a typical ETF, there are entities known as "authorized participants" who can exchange a fixed amount of the underlying securities for shares in the ETF (and vice versa). This creates the mechanism for the ETF price to track the price of the underlying securities. If the price of SPY rises above the price of the S&P 500 index, APs can buy the underlying securities, exchange them for new shares of SPY, then sell the SPY shares. This pushes the price of SPY down towards the fundamental value. That process doesn't exist for BIT because new publicly tradable shares can be created only through this weird 12-month lockup expiration process. It will be interesting to see how it trades!
In the housing boom people built houses and sold mortgages because they were a good investment, not because people actually needed the houses. If the bitcoin ETFs make speculative buying of bitcoins so easy for the average joe, we could see a huge bitcoin price increase, followed by a crash a while later.
It's interesting because it interfaces with existing investment infrastructure, culture, protocols etc. Trying to buy, store securely and apply proper accounting rules to a not fully defined (by law) digital currency concept, is not something investment firms want to bother with unless they specialize in bitcoin. (like SecondMarket).
Instead, they'd just want to pull up a vetted fund on an exchange they're familiar with, on their bloomberg terminal they're familiar with, purchase a financial product whose structure they're familiar with, and apply the same accounting standards as they would normally, and deal with the normal legal ramifications of shares of ETFs.
This essentially means anyone can now get exposure to the price of bitcoin without any extra understanding or investment necessary on the technical bits of storage, accounting etc.
And that could be very interesting. Bitcoin makes for a great opportunity. It can go to 0, or it can do 100x or even 500x value growth in the next 20 years. And I'd say the odds of the latter are greater than 10%. That's why it's not such a crazy idea for billion dollar funds to put $10m into bitcoin, as they'd have a chance of making billions at the cost of losing millions. I wouldn't be surprised if, now that it's easy for any pension fund, hedge fund, family fund or university endowment fund to buy in, that we'll see quite a few of them do.
At least, that's always been the story. "If pension funds dedicated only 0.1% to bitcoin, the price would go up one or two orders of magnitude this decade" or something to that effect.
We'll see how this one plays out.
So this should be a pretty good gambling opportunity. Wish I knew the exact date this thing launches.