An ETF that could transform investing in Bitcoin… and drive its price higher

Julie Brownlee, Fsp Invest, 03 Mar. 2014

Tags: bitcoin, investing, bitcoin etf, bitcoin exchange traded fund, etf, bitcoin backed etf, price of bitcoin, bitcoin price, bit coin, investing in bitcoin, investors, price, investment, digital currency, currency

If you want to invest in Bitcoin, it’s not very easy. But this is changing. There is a new Bitcoin exchange traded fund (ETF) that could make investing in this digital currency easy for investors. Let’s take a closer look at this ETF and why is could transform investing in Bitcoin…

ETFs: A smart way to invest in Bitcoin

At the moment there are two Bitcoin ETFs listed in the US available to invest in, David Zeiler in Money Morning US explains…

But unless you’re super wealthy, you can’t invest in either of them.

This looks set to change with the arrival of the Winklevoss Bitcoin ETF. The ETF will make investing in Bitcoin as simple and straightforward as any other ETF.

One of the twin brothers behind the offering, Tyler Winklevoss, says that their ETF will reduce “the risks associated with storing Bitcoin while offering similar investment attributes to direct ownership".

So how would this Bitcoin ETF work?

It would work in a similar way to commodity-based ETFs like those for gold and silver. The Winklevoss Bitcoin Trust would buy the Bitcoins to back the ETF shares. The filing proposed that the Trust would purchase one Bitcoin for every five shares of the ETF.

Daily transactions would go through a regulated trading desk. The Winklevoss twins say they have a proprietary method for storing the Bitcoins to prevent thieves from hacking into their system and stealing them.

Despite the twins filing for their ETF last year, it is still under review by regulatory authorities in the US. But it looks like it will gain approval come the end of the year.

The effect of the ETF on Bitcoin

The Winklevoss Bitcoin Trust will allow a whole new group of buyers to invest in Bitcoin. And that will likely drive Bitcoin prices higher.

Since the beginning of the year, Bitcoin has traded in a range between $900 and $1,000 on the Mt Gox exchange and between $750 and $850 on Bitstamp.

Many think that as more merchants agree to accept Bitcoin - a trend that already is accelerating - and more people start investing in Bitcoin, prices could skyrocket.

Barry Silbert is the chief executive officer of SecondMarket, one of the existing providers of a Bitcoin ETF. And he believes a lot of major players will make a push into Bitcoin this year.

"We're three to six months away from Wall Street dollars moving into Bitcoin in a big way," Silbert told Entrepreneur magazine in December. Silbert had set a goal for his Bitcoin fund to raise $10 million by the end of the year; it raised $70 million.

And when that happens, watch out.

"Once Wall Street starts putting money into Bitcoin - we're talking about hundreds of millions, billions of dollars moving in - it's going to have a pretty dramatic effect on the price," Silbert said.

So it looks like we’re seeing another step in Bitcoin going mainstream. And the price of Bitcoin looks set to soar higher once again.


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Henk 2014-03-04 10:57:01

You're not saying a word about MtGox filing for bankruptcy last week?


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