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Bitcoin Futures-Based ETF Likely To Be Approved in the US (thestreet.com)
The race is on: who will be the first to launch a Bitcoin exchange-traded fund in the United States? From a report, shared by a reader: In Europe, there is already a Bitcoin exchange traded note (ETN) available to investors. In the U.S., it is widely anticipated a Bitcoin ETF will be be approved by the U.S. Securities and Exchange Commission (SEC) very soon. In Europe, ETNs are designed to track the movement of Bitcoin against the U.S. dollar. The ETNs are Bitcoin Tracker One, which is traded in Swedish krona and Bitcoin Tracker EURO, which is traded in euro. Both ETNs are issued by XBT Provider AB and traded on Nasdaq OMX (Stockholm). Dave Nadig, CEO of ETF.com and previously the director of ETFs at FactSet Research Systemsm believes we can expect to see Bitcoin Futures-based ETF launched in the U.S. by the end of this year. "Yes, you can already trade a derivative in Europe, an exchange traded note which tracks Bitcoin," Nadig adds. "Then the race in the U.S. is the race to see what gets approval first. Will it be a Bitcoin future or a straight up Bitcoin holding ETF? My bet is that we will see Bitcoin futures approved fairly quickly."
CEO.com of ETF.com is betting big that ETF.com will be approved first by US.gov .com
So, how will they determine the price of bitcoin? Which exchange will they quote?
How will the ETF hold bitcoin? Without being hacked?
What happens if the ETF is hacked? (and it will be!)
Maybe I'm missing something, but if you start doing anything that eventually returns to a traditional fiat currency, aren't you going to have issues of speed of transaction, or quantity of transactions (people will try to game things as much as possible, mass quantities of exchanges, automation, etc). Will that be an issue with blockchain currencies? Can it keep up?
Bitcoin Futures-Based ETF Likely To Be Approved in the US
One word: Buy!
My understanding is that BizX owns Slashdot. If you look at bizx.com, they seem to be in the business of electronic currency (though not necessarily a cryptocurrency) for other businesses to exchange goods and services. I thought BizX was a search engine optimization firm, but bizx.com suggests otherwise. There have been a lot of articles about electronic currencies here lately. Does Slashdot's owners have a business interest in the success or failure of cryptocurrency? I'm just wondering...
When the '08 crash happened and the Fed 'printed' money by entering numbers into a computer, that raised my eyebrows to the point where I had a hairline again.
And I have a rudimentary knowledge of currency markets - elective at school (they use lots of computers!)
But at least Fiat money is attached to a government or governing body and hence an economy. Whether buying Dollars or Euros, I'm basically buying into an economy - the US economy or the European economy. The value is based on a number of factors like national/regional debt, trade balances, Geo-politics, etc .... and how the markets interpret them.
BitCoin on the other hand, is buying into an algorithm. An algorithm that I have no chance of understanding and folks who interpret those and I'm assuming, have a greater understanding than I will ever have.
Now having a derivative based on that?! And an ETF?!?
Whatever guys! I'd rather be in Vegas. At least they give odds and games I can understand.
Bitcoin is a demonstration of the absurdity of fiat currency, taken to excess. Its basis is already-performed work on a computer to come up with a number based on previously-computed numbers. The numbers generated have no practical value except in reference to each other.
Some people are, absurdly, willing to exchange such numbers for things of real value. But this odd behavior is far from guaranteed to persist.
Similarly US dollars are based upon the faith in, and credit of, the government of the United States. Said government currently has a head of state who engages in behavior that does not inspire faith, and repeatedly threatens to renege on agreements - thus not providing any operational basis for credit.
All of this points toward a time in the future at which confidence in currency that does not represent real value will collapse as confidence in it erodes.
A valid currency would be one that has a non-negotiable value based on provision of food and shelter, these being things essential to human welfare that can not be changed into data or made from data.
All other currencies are fictional things. That people have faith in them today does not mean they will tomorrow.
Bruce Perens.
It's futures-based, so I don't think they have to actually hold any bitcoin.
Is still the same. The house "exchanges" always wins.
I agree with you on the problems with fiat currency. However, I think you could make an argument that the value of Bitcoin in particular is the integrity of the blockchain and the wide-spread usage of it's clients. As tokens of authenticity, they do have some value.
I think the underlying issue with Bitcoin is that it isn't easy to nail down as any one particular thing. It has some properties of a currency and can be used as one, but it really isn't a currency in the traditional sense. It's kind of like a negotiable bearer-bond, it's kind of like a traveler's check, it's partially a p2p network and sort of like a Keberos token. But it isn't exactly like any one of those things.
My Other Computer Is A Data General Nova III.
Having the another country printing is own fiat currency does not really affect the price of the USD. There is 873 ish alt-coin (https://coinmarketcap.com/currencies/views/filter-non-mineable-and-premined/). Most of them are extremely illiquid thus do not have that real price. If I sell/buy for $5000 of the bottom half of those alt-coins you will see a huge price change. Each of them competes against them with different ideas and strategy. Most will fail, some may discover a better solution. The fact another currency can be created has nothing to do with the limit. There will never be more than 21 million Bitcoin. This is a fact and that will never change. In your original comment, you said a good currency would have redeemable value, that's good in practice but impossible in reality. The good (no matter what it is (food, water, gold) do not have the same price everyone on earth and WHO will be in charge to do the redeem? There would be massive fraud. I prefer to stick with the law of math that can't be cheated.
An ETF is an Exchange Traded Fund. It is a financial instrument that is traded on a traditional stock market but holds a set of assets that are not traded on a stock market. The purpose is to bridge the gap between the two markets and allow more investment opportunities.
In this case, a BitCoin futures contracts are used as the underlying instrument. Futures contracts are yet another financial instrument that are traded in their own market (the futures market!) along with oil, corn, coffee, orange juice, and my favorite: pork bellies. Futures contracts generally use large contracts and require a lot of capital to trade so having an ETF composed of them allows smaller investors the ability to trade futures at a distance.
Ultimately the way this will all work is this: BitCoin moves on the market day-to-day. The BitCoin futures market will move in response to this, but it will also move in response to people's future expectations of the price in BitCoin (hence the term 'futures'). The ETF will hold a certain number of futures contracts which will be divided into shares which will then be traded on the NYSE or NASDAQ. The price of these shares will reflect the prices of BitCoin, the BitCoin futures contracts, and the management overhead of the ETF. The contracts are all dated and the ETF will have a set trading scheduling for rotating contracts as they expire.
Of course there is a lot of minutiae to consider but this is gist. ETFs are very standard and have been traded for a long time. I'm more surprised there's a BitCoin futures market. Futures markets for onions are verboten!
The currency of choice for anarchists and Ferengi weapons traders.
My understanding in reading this article is that the SEC will want to identify people who attempt to exchange bitcoin for paper currency. This makes pretty good sense from a government perspective since the real threat of bitcoin is it's ability to transfer money anonymously and avoid regulation. However, in doing so it undermines the foundation in which bitcoin was created which is to allow for anonymous transactions with no regulatory oversight or central authority. I would imagine that people using bitcoin who do want to remain anonymous would probably never use the exchange. However, those who wish to convert the bitcoin back to a fiat currency would allow for government to regulate those individuals. In doing so they would expose all transactions that link to their signature in the block chain which raises the question, would the government seek to identify those on the other end who wish for their identity to remain anonymous? My guess to this question is most undoubtedly, yes they would, especially come tax season. So at this point, how would bitcoin be different than any other currency? The answer is it wouldn't. I can see both sides to the argument because they each have legitimate beliefs and concerns. Seems like the age old argument since 9/11 - Privacy vs. Loss of Civil Liberties. Ultimately, what is really at question here isn't bitcoin. It's how much freedom are people willing to give up for a small number of government employees to feel like they are making a difference in the world? Personally, I try to weigh the pro's and con's. What is more likely, that people I care about will fall victim to a bitcoin user with nefarious intentions (whether directly or indirectly) or people I care about falling victim to their civil liberties being violated, or worse. At this point the answer becomes pretty obvious. If not, do your research and reach your own conclusion.
ETF is not futures. Look at GLD.
what. could. possibly. go. wrong.
So, how will they determine the price of bitcoin?
The buyers and sellers of the ETF determine the price. It is traded on a stock exchange, just like shares.
How will the ETF hold bitcoin? Without being hacked?
Most likely their bitcoin will be isolated from the Internet. They will not be buying and selling bitcoin directly. Their clients buy/sell to each other, not to/from the fund.
What happens if the ETF is hacked? (and it will be!)
When has the NYSE been hacked?
It's futures-based, so I don't think they have to actually hold any bitcoin.
ETFs are not futures. It would be insanely risky for them to do this without holding actual bitcoins, and I doubt if the SEC would let them do that.
What happens if the ETF is hacked? (and it will be!)
When has the NYSE been hacked?
Who says they haven't?
But anyhow...you're confusing hacking the *exchange* with hacking their wallet holding millions, or potentially billions in bitcoin or other cryptocurrency. Two very different things there.
Plus, if you hacked the exchange they just void your errant transactions (bad transactions are thrown out fairly often as a normal matter of business) while if you got the private key for the wallet and transferred out coins you'd either have to fork the blockchain or allow the loss. There's no method to rescind individual transactions.
You can get rich if you own a politician, but you have to be rich to buy one in the first place.
Are you thinking that a national actor will attack the block chain servers after wide adoption? Your comment is interesting, but I don't see a trivial fashion to selectively 'turn off' bitcoin for a specific target country. A national actor could create some interesting problems for validating the BC. Please expound.
HA! I just wasted some of your bandwidth with a frivolous sig!
It's actually hard to see why this will actually kill bitcoin, but it will. This is surprising because normally a future's market allows arbitraging price fluctuations and thus dampens fluctuations and Bit coin seems to need that. But bit coin is built on a subtle principle that no other method of exchange has, and this depends critically on their not existing a side channel for selling and buying bit coin.
Huh? you ask. Let me explain. The price of gold is not actually tied to the price of mining gold. We already have a lot of gold. It's price just depends on what someone is willing to offer a seller. Bit coin is the only currency in existence who's value is tethered to it's cost of production. THe reason is that the price of bitcoin depends not just on what a buyer is willing to pay, but also that a miner is willing to mine it at that price. If you can't find a miner willing to mine when bitcoin has a value of ten cents but the cost of a mining operation is $300 then the miner doesn't mine. So the offer of ten cents never can be completed. No transaction occurs. You can't sell your bit coins for ten cents.
If there's a future's market you can buy and sell bit coin at any price, just like you can with gold. So this tether is erased. Bit coin is just like a tulip bulb at that point, just like it's critics say it is. It isn't due to the mining requirement but take that away and it is indeed a tulip.
THe second problem with Futures markets is that they allow shorting. Shorting when done at scale doesn't merely arbitrage risks it becomes a self fulfilling prophecy. It's actually worse for bit coin because there's no reserve requirement and no margin requirment. So someone who shorts, sells the bit coin they borrow but the person who loaned the bitcoin has a promisary note from the buyer to repay. That's an asset that they can also sell, effectively doubling the amonut of bitcoin in circulation. Which drives the price down. Leading to more shorting.
It's death for bitcoin.
Now one of the arguments I just made here about the tethering effect is becomeing slightly flawed. A bitcoin depends more and more on paying miners fees and les and less on mining new coins then the tether between price and the cost of mining goes away. My own feeling it this is why bit coins valuation is fluctuating so much. I think few people realize how important and unique that tether was to setting the value of bitcoin intrisically rather than letting it simply be another fiat currency.
Some drink at the fountain of knowledge. Others just gargle.
ETFs can most certainly be futures-based (or based on physical commodities or stock equities). The entire point of this article is the near term possibility of such Bitcoin futures-based ETFs.
How does physical commodity based ETF GLD preclude a futures-based Bitcoin ETF? There are many futures-based ETFs, for example DGL gold futures ETF, UNG, USO). This article talks about possible approval of futures-based ETF for Bitcoin in the near future so actually holding bitcoin would not be an issue..
What does this mean for people struggling financially? As it stands, Bitcoin is not really viable for our use still. The cost of services, transaction fees, conversion rates are significantly higher than the non-cryptocoin alternatives. It simply isn't affordable. So how is Bitcoin Futures-Based ETF going to solve this?
At the moment, Bitcoin just seems like another tool to benefit the rich and criminals.
Then there's the cryptocoin that is supposed to be an ETF for all of the thousands of crypto coins out there; Iconomi ... can it get more meta?
ICOs, Bitcoin forking to Bitcash which created 'value' out of thin air, 293847932847 new coins released every day...
It's all becoming pretty absurd.
Huh? you ask. Let me explain. The price of gold is not actually tied to the price of mining gold. We already have a lot of gold. It's price just depends on what someone is willing to offer a seller. Bit coin is the only currency in existence who's value is tethered to it's cost of production. THe reason is that the price of bitcoin depends not just on what a buyer is willing to pay, but also that a miner is willing to mine it at that price. If you can't find a miner willing to mine when bitcoin has a value of ten cents but the cost of a mining operation is $300 then the miner doesn't mine. So the offer of ten cents never can be completed. No transaction occurs. You can't sell your bit coins for ten cents.
One of the interesting things about bitcoin as you learn more about it is how well it actually covered all the flaws that people think it has.
In your case the piece you are missing is the difficulty scaling adjustments in bitcoin. There is no fixed cost of mining. More miners = higher cost of mining. Less miners = lower cost of mining. So the cost of mining tends to be tethered to the price of bitcoin, not the other way around. The higher it is the more people mine, the higher the cost of mining until it reaches a state where there is a tiny profit margin. Price of bitcoin goes down, then the less efficient people drop out and the difficulty of mining goes down until it is just barely profitable for the people still mining.