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The SEC attaches a string to Bitcoin ETFs

26 points by janandonly 3y ago

MuffinFlavored 3y ago
Slightly related: what kind of "trustable/auditable" public analytics are there on what contributes to the volume of Bitcoin trading from a "how authentic is it" perspective? Peeling back the onion: I don't care if exchanges trade back and forth all day to simulate fake demand (volume/exchanges between wallets that aren't actually going to transactions for goods/services aka crypto isn't really being used at $26b/day). That doesn't explain to me the larger question: Who/what (entities, individuals, at what scale) are purchasing Bitcoin every day/week/month/quarter and holding on to it long enough for it to be up to $44k (166% year to date) How many individuals are contributing how many dollars and then holding the asset without speculatively turning around and selling it every single day? How much artificial vs non-artificial demand is there? How big of a role is the artificial demand? How is the artificial demand able to prop up (if it exists) $864b (current BTC market cap) worth of demand/assets?
- junofan 3y ago
  It’s objectively one of the best-performing assets in human history. Lots of funds are buying. What do you mean by “artificial demand”?
  - I_Am_Nous 3y ago
    I believe they are referencing wash trading[1], where trades are made of a certain security but the buyers and sellers are the same person/group. This makes it appear like there is more demand for the security in the market, enticing buyers who look solely at trade volume. Forbes did some investigation[2] and found that a a lot of the trades that occur on exchanges are wash trades. So while it's clear that bitcoin is a cultural phenomenon it's hard to say exactly how much of the market is real and how much is a show to get more people holding bags and willing to pick up more. 1. https://www.investopedia.com/terms/w/washtrading.asp https://www.investopedia.com/terms/w/washtrading.asp 2. https://www.forbes.com/sites/javierpaz/2022/08/26/more-than-half-of-all-bitcoin-trades-are-fake/?sh=19d81046681f https://www.forbes.com/sites/javierpaz/2022/08/26/more-than-...
    - MuffinFlavored 3y ago
      > So while it's clear that bitcoin is a cultural phenomenon it's hard to say exactly how much of the market is real and how much is a show to get more people holding bags and willing to pick up more. And to the next layer: how effective it is at getting "people" (how many people/how many dollars) to "hold bags" (invest/purchase it/hold-on-for-dear-life)? How much of Bitcoin's ~160% runup/return this year so far can be attributed to regular Joe's investing their hard earned money into it? How can you quantify what portion/contribution of the probably... billion/trillion shift of money (from USD/EUR/whatever into BTC) it's taking to keep BTC at this $40k+ level? How is there new demand every day?
  - MuffinFlavored 3y ago
    > It’s objectively one of the best-performing assets in human history. I feel like this ignores the question "should it be"? What purpose is it filling for society in its current state? I find it highly unlikely that 100% of its daily volume ($26b) is treating it as a currency (exchanging it for goods + services). I don't have the statistics but I'd go as far as to wager less than 50% of its volume is using it as a currency/vehicle for currency/vehicle for utility at all. Which goes back to the original question: just because it's one of the best performing assets of all time doesn't mean that it should be if you introduce logic + reason + facts around it, right? Who is using it for what currently and at what scale? Are 99.99% of people using it as a vehicle for speculative investment and nothing else? How many dollars are being pumped into it every day (inflows)? https://www.history.com/news/how-the-beanie-baby-craze-came-to-a-crashing-end https://www.history.com/news/how-the-beanie-baby-craze-came-...
    - codersfocus 3y ago
      > What purpose is it filling for society in its current state? It’s the greatest convenience-security ratio store of value. Precious physical things are not convenient. Fiat currency is not safe. (Don’t bring up consumer use cases. Bitcoin is a store of value, not a currency.)
      - MuffinFlavored 3y ago
        > It’s the greatest convenience-security ratio store of value. How? As an average (not doing anonymous things at crypto ATMs around the country, which might have cameras) US customer who wants to use it, you need to give Coinbase (exchange) a ton of banking + social security info, etc. (typical know-your-customer KYC validation flow, I think you even send then your driver's license)? And you are supposed to file whatever you do crypto wise on your taxes
    - deleted 3y ago
      [deleted]
    - heroprotagonist 3y ago
      > I find it highly unlikely that 100% of its daily volume ($26b) is treating it as a currency (exchanging it for goods + services). What happens if you apply this same criteria to, say, the US dollar? Should US dollars go away?
- TacticalCoder 3y ago
  > How much artificial vs non-artificial demand is there? I sure have no idea but there's demand and then there's supply. Supply of newly minted Bitcoins is going down by 50% in four months. I don't know who's buying all the coins but miners have costs to cover and it's known they exert a lot of pressure by selling part of their mined Bitcoins. That was Satoshi's great middle finger (I don't care if it's good or not: I see it as masterclass trolling): create something which, unlike, say, the USD, cannot be printed at will.
- staplers 3y ago
  > How big of a role is the artificial demand? That's determined by central banks. > How is the artificial demand able to prop up $864b worth of demand/assets? Ask yourself how central banks create money. Here's a hint: Over 90% of global currency is digital.
- affyboi 3y ago
  > I don't care if exchanges trade back and forth all day to simulate fake demand (volume/exchanges between wallets that aren't actually going to transactions for goods/services aka crypto isn't really being used at $26b/day). It sounds like you do care because you want to see “real” demand (unless I’m misinterpreting). This is the same reason wash trading is illegal in the regular markets
jgalt212 3y ago
So I cannot fence my stolen bitcoin by converting it into ETF shares? The SEC is so unfair!
yieldcrv 3y ago
I actually like the high bar thats set by no-coiners, it really does improve the space This practically guarantees the bitcoin market will become extremely liquid for extremely large amounts over on wallstreetjournal comments it is still common to see out of touch people wonder if anyone’s ever converted their crypto to cash, not knowing how commonplace that is globally for the last 10 years as they’ve only seen negative headlines their entire life its still common for people to have antiquated views about the level of liquidity in the crypto space. “Good luck cashing out those millions!” cashes out hundreds of millions this standard would move that to billions very easily in a single transaction near the best bid and ask, with dozens of bitcoin ETFs always doing transactions to match retail order flows in the stock market.
- MuffinFlavored 3y ago
  > This practically guarantees the bitcoin market will become extremely liquid for extremely large amounts Isn't it actively walking towards block-halving and there being a fixed number of coins in circulation (aka walking towards eventual illiquidity)?
  - yieldcrv 3y ago
    by large amounts I was referring to large amounts of notional US dollars worth of bitcoin if bitcoin becomes more scarce with that large notional demand, it will be fewer bitcoin traded at higher prices regarding the block-halving issuance schedule, one of the advances bitcoin heralded 15 years ago was being an infinitely divisible asset. so if people want to hoard their bitcoin then smaller and smaller units can trade in that reality, to accommodate larger and larger notional values of fiat to trade. but this alone goes hand in hand with the purpose of the block halving - thats just a subsidy to spur a parallel economy, as the block reward is intended to be supplanted by the transaction fees to redistribute bitcoin. this is already working successfully, most bitcoin blocks this year have transaction fees greater than the block reward. the same has occurred on the Ethereum network for extended periods of time too. the SEC’s arbitrary and encumbering standard increases the number of transactions on the bitcoin network too. strengthening the velocity of transactions and therefore its transaction fee economy. this has come to fruition in every macroeconomic environment now. one can transparently see how bitcoin is hoarded, to me its more interesting that it matches the same distribution of most other asset classes. The M1 in currency is the tiny percentage actively traded and used as cash with merchants, a small percent of the float trades for equities, commodities. no-coiners try to use the same standards to denigrate bitcoin, but functionally bitcoin and crypto do meet their prior bars and surpass them solely due to the pressure.
mypastself 3y ago
I still don’t get it. A fund of what? As the article rightly states, a normal ETF consists of a basket of different companies’ shares. I’d understand if this was marketed as a fund containing various cryptocurrencies, but this is… just Bitcoin? Different Bitcoin forks?
- sfjailbird 3y ago
  No different than a gold ETF.
jrflowers 3y ago
This is troubling. Considering the history of crypto currency it is a mystery to me why would anyone take an issue with an ETF operating in a way that’s identical to a normal Bitcoin exchange website
jbverschoor 3y ago
So the ETF will be more expensive. That’s always the case, as there’s also a management fee. It will still open up the market for many retail and institutional. It will also be good for custodians and exchanges, such as coinbase. And for the price sensitive among them, it will cause more demand on actual crypto.
boppo1 3y ago
Are there any finance guys here that know the prospectus form number that lays out all the nitty gritty details of how the ETF holds bitcoin? Like the ETF version of an S-1?
- hbcondo714 3y ago
  They still need to file an S-1 like iShares Bitcoin Trust did: https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001980994&type=&dateb=&owner=include&count=40&search_text= https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&C...
- tomputer 3y ago
  Coinbase Custody Trust Company, LLC (the “Bitcoin Custodian”) is the custodian for the Trust’s bitcoin holdings. Source: https://www.sec.gov/Archives/edgar/data/1980994/000143774923034772/bit20231215_s1a.htm https://www.sec.gov/Archives/edgar/data/1980994/000143774923...

26 points by janandonly 3y ago

Slightly related: what kind of "trustable/auditable" public analytics are there on what contributes to the volume of Bitcoin trading from a "how authentic is it" perspective? Peeling back the onion: I don't care if exchanges trade back and forth all day to simulate fake demand (volume/exchanges between wallets that aren't actually going to transactions for goods/services aka crypto isn't really being used at $26b/day). That doesn't explain to me the larger question: Who/what (entities, individuals, at what scale) are purchasing Bitcoin every day/week/month/quarter and holding on to it long enough for it to be up to $44k (166% year to date) How many individuals are contributing how many dollars and then holding the asset without speculatively turning around and selling it every single day? How much artificial vs non-artificial demand is there? How big of a role is the artificial demand? How is the artificial demand able to prop up (if it exists) $864b (current BTC market cap) worth of demand/assets?

junofan 3y ago
It’s objectively one of the best-performing assets in human history. Lots of funds are buying. What do you mean by “artificial demand”?
- I_Am_Nous 3y ago
  I believe they are referencing wash trading[1], where trades are made of a certain security but the buyers and sellers are the same person/group. This makes it appear like there is more demand for the security in the market, enticing buyers who look solely at trade volume. Forbes did some investigation[2] and found that a a lot of the trades that occur on exchanges are wash trades. So while it's clear that bitcoin is a cultural phenomenon it's hard to say exactly how much of the market is real and how much is a show to get more people holding bags and willing to pick up more. 1. https://www.investopedia.com/terms/w/washtrading.asp https://www.investopedia.com/terms/w/washtrading.asp 2. https://www.forbes.com/sites/javierpaz/2022/08/26/more-than-half-of-all-bitcoin-trades-are-fake/?sh=19d81046681f https://www.forbes.com/sites/javierpaz/2022/08/26/more-than-...
  - MuffinFlavored 3y ago
    > So while it's clear that bitcoin is a cultural phenomenon it's hard to say exactly how much of the market is real and how much is a show to get more people holding bags and willing to pick up more. And to the next layer: how effective it is at getting "people" (how many people/how many dollars) to "hold bags" (invest/purchase it/hold-on-for-dear-life)? How much of Bitcoin's ~160% runup/return this year so far can be attributed to regular Joe's investing their hard earned money into it? How can you quantify what portion/contribution of the probably... billion/trillion shift of money (from USD/EUR/whatever into BTC) it's taking to keep BTC at this $40k+ level? How is there new demand every day?
- MuffinFlavored 3y ago
  > It’s objectively one of the best-performing assets in human history. I feel like this ignores the question "should it be"? What purpose is it filling for society in its current state? I find it highly unlikely that 100% of its daily volume ($26b) is treating it as a currency (exchanging it for goods + services). I don't have the statistics but I'd go as far as to wager less than 50% of its volume is using it as a currency/vehicle for currency/vehicle for utility at all. Which goes back to the original question: just because it's one of the best performing assets of all time doesn't mean that it should be if you introduce logic + reason + facts around it, right? Who is using it for what currently and at what scale? Are 99.99% of people using it as a vehicle for speculative investment and nothing else? How many dollars are being pumped into it every day (inflows)? https://www.history.com/news/how-the-beanie-baby-craze-came-to-a-crashing-end https://www.history.com/news/how-the-beanie-baby-craze-came-...
  - codersfocus 3y ago
    > What purpose is it filling for society in its current state? It’s the greatest convenience-security ratio store of value. Precious physical things are not convenient. Fiat currency is not safe. (Don’t bring up consumer use cases. Bitcoin is a store of value, not a currency.)
    - MuffinFlavored 3y ago
      > It’s the greatest convenience-security ratio store of value. How? As an average (not doing anonymous things at crypto ATMs around the country, which might have cameras) US customer who wants to use it, you need to give Coinbase (exchange) a ton of banking + social security info, etc. (typical know-your-customer KYC validation flow, I think you even send then your driver's license)? And you are supposed to file whatever you do crypto wise on your taxes
  - deleted 3y ago
    [deleted]
  - heroprotagonist 3y ago
    > I find it highly unlikely that 100% of its daily volume ($26b) is treating it as a currency (exchanging it for goods + services). What happens if you apply this same criteria to, say, the US dollar? Should US dollars go away?
TacticalCoder 3y ago
> How much artificial vs non-artificial demand is there? I sure have no idea but there's demand and then there's supply. Supply of newly minted Bitcoins is going down by 50% in four months. I don't know who's buying all the coins but miners have costs to cover and it's known they exert a lot of pressure by selling part of their mined Bitcoins. That was Satoshi's great middle finger (I don't care if it's good or not: I see it as masterclass trolling): create something which, unlike, say, the USD, cannot be printed at will.
staplers 3y ago
> How big of a role is the artificial demand? That's determined by central banks. > How is the artificial demand able to prop up $864b worth of demand/assets? Ask yourself how central banks create money. Here's a hint: Over 90% of global currency is digital.
affyboi 3y ago
> I don't care if exchanges trade back and forth all day to simulate fake demand (volume/exchanges between wallets that aren't actually going to transactions for goods/services aka crypto isn't really being used at $26b/day). It sounds like you do care because you want to see “real” demand (unless I’m misinterpreting). This is the same reason wash trading is illegal in the regular markets

jgalt212 3y ago

So I cannot fence my stolen bitcoin by converting it into ETF shares? The SEC is so unfair!

yieldcrv 3y ago

I actually like the high bar thats set by no-coiners, it really does improve the space This practically guarantees the bitcoin market will become extremely liquid for extremely large amounts over on wallstreetjournal comments it is still common to see out of touch people wonder if anyone’s ever converted their crypto to cash, not knowing how commonplace that is globally for the last 10 years as they’ve only seen negative headlines their entire life its still common for people to have antiquated views about the level of liquidity in the crypto space. “Good luck cashing out those millions!” cashes out hundreds of millions this standard would move that to billions very easily in a single transaction near the best bid and ask, with dozens of bitcoin ETFs always doing transactions to match retail order flows in the stock market.

MuffinFlavored 3y ago
> This practically guarantees the bitcoin market will become extremely liquid for extremely large amounts Isn't it actively walking towards block-halving and there being a fixed number of coins in circulation (aka walking towards eventual illiquidity)?
- yieldcrv 3y ago
  by large amounts I was referring to large amounts of notional US dollars worth of bitcoin if bitcoin becomes more scarce with that large notional demand, it will be fewer bitcoin traded at higher prices regarding the block-halving issuance schedule, one of the advances bitcoin heralded 15 years ago was being an infinitely divisible asset. so if people want to hoard their bitcoin then smaller and smaller units can trade in that reality, to accommodate larger and larger notional values of fiat to trade. but this alone goes hand in hand with the purpose of the block halving - thats just a subsidy to spur a parallel economy, as the block reward is intended to be supplanted by the transaction fees to redistribute bitcoin. this is already working successfully, most bitcoin blocks this year have transaction fees greater than the block reward. the same has occurred on the Ethereum network for extended periods of time too. the SEC’s arbitrary and encumbering standard increases the number of transactions on the bitcoin network too. strengthening the velocity of transactions and therefore its transaction fee economy. this has come to fruition in every macroeconomic environment now. one can transparently see how bitcoin is hoarded, to me its more interesting that it matches the same distribution of most other asset classes. The M1 in currency is the tiny percentage actively traded and used as cash with merchants, a small percent of the float trades for equities, commodities. no-coiners try to use the same standards to denigrate bitcoin, but functionally bitcoin and crypto do meet their prior bars and surpass them solely due to the pressure.

mypastself 3y ago

I still don’t get it. A fund of what? As the article rightly states, a normal ETF consists of a basket of different companies’ shares. I’d understand if this was marketed as a fund containing various cryptocurrencies, but this is… just Bitcoin? Different Bitcoin forks?

sfjailbird 3y ago
No different than a gold ETF.

jrflowers 3y ago

This is troubling. Considering the history of crypto currency it is a mystery to me why would anyone take an issue with an ETF operating in a way that’s identical to a normal Bitcoin exchange website

jbverschoor 3y ago

So the ETF will be more expensive. That’s always the case, as there’s also a management fee. It will still open up the market for many retail and institutional. It will also be good for custodians and exchanges, such as coinbase. And for the price sensitive among them, it will cause more demand on actual crypto.

boppo1 3y ago

Are there any finance guys here that know the prospectus form number that lays out all the nitty gritty details of how the ETF holds bitcoin? Like the ETF version of an S-1?

hbcondo714 3y ago
They still need to file an S-1 like iShares Bitcoin Trust did: https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001980994&type=&dateb=&owner=include&count=40&search_text= https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&C...
tomputer 3y ago
Coinbase Custody Trust Company, LLC (the “Bitcoin Custodian”) is the custodian for the Trust’s bitcoin holdings. Source: https://www.sec.gov/Archives/edgar/data/1980994/000143774923034772/bit20231215_s1a.htm https://www.sec.gov/Archives/edgar/data/1980994/000143774923...