Bitcoin Futures-Based ETF Likely To Be Approved in the US (thestreet.com) 59
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."
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It's futures-based, so I don't think they have to actually hold any bitcoin.
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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.
How this kills bitcoin (Score:2)
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.
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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?
Re:wonderful idea! /sarc (Score:4, Interesting)
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.
High Speed anything... (Score:1)
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?
Re:High Speed anything... (Score:5, Interesting)
This will actually be a plus for the woefully slow blockchain, as it allows speculators to move to real markets: an ETF will be far easier to trade than actual bitcoin, just as currency futures are mush easier to trade than schlepping physical currency around. The ETF can trade many times per day (or per second) without the underlying bitcoin changing owners.
But it's also the beginning of the "BTC money supply" becoming disconnected from the amount of issued BTC. Once we start seeing BTC-denominated savings accounts and currency derivative swaps, the BTC money supply will be many times larger than the actual issued BTC, and BTC will see many of the same behaviors as "fiat currency". Just as fixing the supply of physical USD currency would mean almost nothing to inflation or the USD money supply, the fact that the issued BTC will son become fixed will mean almost nothing. Welcome to modern finance.
Did you know there the total value of currency and credit derivatives is now half a quadrillion dollars? People worried about the Fed's control of the money supply are only seeing one tree in the forest. Currency derivatives for BTC already exist - what fun.
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Seems like all of this just opens things up to even greater levels of gaming... If it works like it has for Silver (in my humble opinion), then it will bring the price down for BTC. If you can short it in some way, then the path to fortunes will be made. ;-)
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Seems like all of this just opens things up to even greater levels of gaming...
Yes, indeed. But the real commodities markets have been gamed for around 400 years now by some of the smartest people who have ever lived, and the markets have firm protections with sharp legal teeth for all but the most recent of those "exploits". The BTC exchanges have no such protection, as should be obvious by now.
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Currencies will collapse. IMO Bitcoin was created to crash national economies, by a national actor.
Attack vector? (Score:2)
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I'm also confused about the scenario you're proposing. Say more? Are you envisioning BTC being more, or less stable than existing national currencies? Or first the one, then the other?
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Except there's no way to bail out anyone. There is no government which can create Bitcoin out of thin air. If you owe Bitcoin that you don't have, you're S.O.L.
A bank has lots of BTC in savings accounts, but almost no capital to back it up. There's a run on the BTC in that bank and they get a bailout. The Fed either given them USD to buy BTC, or if that BTC is simply being transferred to another bank, the Fed just allows the destination bank to increase the count of BTC on its ledger as "a payment from the Fed" without decremented the Fed's ledger (the OE trick).
Government-level bailouts, sure that's different, but you can get pretty extreme with central bank tr
Slashdotters...Please Buy! (Score:2)
Bitcoin Futures-Based ETF Likely To Be Approved in the US
One word: Buy!
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So when they open the floodgates of money of ordinary people to buy Bitcoin via usual commercial channels ... you think the price is going to dump? yeah, sure...
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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,
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Seems like it is more like a commodity future than an currency future...
Re:OK, I get it. Fiat money.... (Score:4, Insightful)
But at least Fiat money is attached to a government or governing body and hence an economy.
When you look at historical societies that have traded using different forms of non-fiat currencies it's hard to argue that you need a central enforcement body. All that is needed for currency trade is the trust that whatever tokens are exchanged can later be exchanged for other goods. Nation states ensure this with military but trading peoples have relied on other methods for at least 10,000 years.
When you consider that it's all fake, you can bundle anything up like this.
Buy Tulip Bulbs NOW! (Score:4, Insightful)
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.
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That should say "All of this points toward a time in the future at which currency that does not represent real value will collapse as confidence in it erodes.
Re:Buy Tulip Bulbs NOW! (Score:5, Insightful)
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Alt-coin and total supply (Score:3)
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But in that case, they are other countries. Cryptocurrencies in contrast are linked to no particular nation. There are a number of alternative cryptocurrencies that are currently somewhat liquid, such as Ethereum, Bitcoin Cash, Ripple and Litecoin.
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I agree that the value of shelter and food is different in different places, but that is a matter of definition. Regarding who would provide it, it has naturally so far been nations that back their currencies. Although this has fallen out of fashion. After nations, there are international organizations such as the EU.
Although a health-and-welfare based currency has its issues, surely they are not greater issues than a fiat cryptocurrency. Basing on a variable and somewhat problematic thing of value beats ba
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And with no central governing authority nor protections, bitcoin behaves just like the gold backed currencies of yore on steroids (and those days sucked).
Sorry, but I prefer stable currencies that have at least some form of regulation and protection. I don't like currencies that swing between worthless and hoard. I also don't like currencies that can vanish from wherever and have absolutely no legal recourse. Been there, done that.
Blockchain (Score:2)
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 ne
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Money is an invention and Bitcoin is the best private money so far. You are advocating abandoning money and returning to barter? You can not commoditize shelter or food. That is not money. If you call for gold then - yes, gold is one sort of good money. Gold & Bitcoin are both good. Rai stones - not anymore. Bitcoin is still young... look at the volatility and tiny marketcap. This will change in coming years and you will use it too in a decade or so even if you don't know about it. Bitcoin and other cry
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Food and shelter in a particular place, with particular limits, are indeed a commodity. Futures of food and real estate are traded.
Interesting that you should cite the stock market, and particularly in tech companies. This is driven more by hysteria than anything else.
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Gold hardly has any real value either. It's just like everything else. Whatever people are willing to trade for it.
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Bitcoin (Score:4, Insightful)
Seems like a contradiction (Score:1)