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If this works out, it'll provide a great mechanism for price discovery to happen outside of the scope of exchanges. The ETF price will act as a proxy for the bi
by vijayboyapati 13y ago
If this works out, it'll provide a great mechanism for price discovery to happen outside of the scope of exchanges. The ETF price will act as a proxy for the bitcoin price. One of the worst aspects on the crackdown on MtGox has been the hampering of price discovery and liquidity. Dollar prices, in particular, vary greatly across exchanges and this is a sign that the market is still deeply illiquid.
- unclebucknasty 13y agoI don't understand how this would be the case. Not challenging your assertion. I literally don't understand. My understanding was that ETFs are usually intended to track the underlying commodity, not the other way around. In fact, they are frequently backed by the commodity itself of course (sometimes leveraged. Sometimes not). So, to that extent pricing should still be pegged to Bitcoin, which would mean that supply and demand on the exchanges should be the biggest determinants of price/discovery. If anything, an ETF would seem to obfuscate the price given the difficulty of tracking the underlying commodity that can occur with some ETFs. So, in my mind, for an ETF to even accurately track the commodity, the liquidity, price discovery, and other market mechanisms for efficient trading of that commodity itself must already be in place. Only then would the ETF serve as a proxy. Otherwise, layering another abstraction would seem to add more confusion than clarity.