Bitcoin ETF's

[Urbandreamer]

Well, unlike yesterday, it's now official.

The SEC (securities and exchange commission) has authorized a bunch of bitcoin spot ETF's.
https://cryptopotato.com/its-official-s ... ed-states/

Yesterday? What happened with the unsecured exchange commission then?
Oh, they didn't secure their X (twitter) account and it was announced that they authorized the ETF's yesterday.
https://cryptopotato.com/x-confirms-sec ... er-no-2fa/

Ok, don't rush out to buy one. I seriously doubt that any of you will actually be able to invest in any of these ETF's anytime soon. UK regulations require investors be given information in certain forms. Many US companies can't see the point in spending the money to do so. Hence there are many US funds that you can't invest in.

Possibly of more interest is the false post itself. Naturally it calls into question the SEC's care and attention to what it does. Indeed I understand that a couple of US Senators are quite unhappy.
https://twitter.com/SenVancePress/statu ... 6300810631

Anyway, despite the fact that you can't buy any of these ETF's, I thought that I'd leave you with an add for one.
https://twitter.com/hashdex/status/1743287176337482184
Note you will need the sound to understand it. Well worth watching.

Disclaimer: I don't think that I'll be buying a bitcoin ETF, though who knows. With the FCA and banks tightening the screws it may be that the only way to get bitcoin exposure in the UK might be through your stockbroker!

[murraypaul]

Curious as to what you think about this?

It seems yet another move even further from what Bitcoin was intended to be.

Now you can speculate on its future value without even having to buy any.

[Urbandreamer]

Curious as to what you think about this?

It seems yet another move even further from what Bitcoin was intended to be.

Now you can speculate on its future value without even having to buy any.

I suspect that my views on this are akin to your own.

For the retail investor, I see absolutely no advantage whatsoever.
For those interested in bitcoin, I find the introduction of bitcoin ETF's as unfortunate to say the least.

Were I to attempt to stand back and ignore either bitcoin or investment then the position of the SEC was, and has been proven in court, to be untenable.

The future "value" of the etf format? Well clearly it will provide an income stream to those who run them. It will also provide commission to the existing regulated stockbrokers. Finally it provides states with a means of censoring investment, not upon the investment, but upon the person doing so.

Stockbrokers may also not be required to ask you questions about bitcoin or eth just to buy shares in Shell. (Sorry still irritated about the meme coin quiz).

With regards to speculation without buying bitcoin. That was already possible. The SEC already allowed ETF's that invest in crypto mining companies and bitcoin derivatives, just not real bitcoin. A quite untenable position.

I don't want to get into a debate about what bitcoin was intended to be. I've just listened to one, which while polite, contained a fair amount of vitriol.

For myself the attraction of bitcoin is principally an alternative to fiat. I get to chose to use it rather than be forced to use it.
I also like the censorship resistance of the base layer, though accept that my own dealings with it expose me to targeted censorship.

One of my jobs today is to move my principle bank account as I'm hearing of too many people who bank with Santander having their accounts frozen for using the same crypto exchange that I do.

I know your opinion of cryto exchanges, but I would rather lose both the fiat and bitcoin on the exchange, than the fiat in my current account. Basically I have been trusting my principle bank more than I ought.

[Lootman]

One of my jobs today is to move my principle bank account as I'm hearing of too many people who bank with Santander having their accounts frozen for using the same crypto exchange that I do.

Really? That is outrageous.

If other banks do not do that then could you not simply open a second bank account for crypto activity?

As for crypto ETFs, I am a big fan of ETFs in general and so I see this extension as a logical move. It will provide more liquidity, and also via options more opportunities to hedge. It may also draw in more institutional interest.

So I do not see what harm it can cause. Crypto futures ETFs have been around for a couple of years. This just adds the spot market to that.

[Urbandreamer]

One of my jobs today is to move my principle bank account as I'm hearing of too many people who bank with Santander having their accounts frozen for using the same crypto exchange that I do.

Really? That is outrageous.

If other banks do not do that then could you not simply open a second bank account for crypto activity?

As for crypto ETFs, I am a big fan of ETFs in general and so I see this extension as a logical move. It will provide more liquidity, and also via options more opportunities to hedge. It may also draw in more institutional interest.

So I do not see what harm it can cause. Crypto futures ETFs have been around for a couple of years. This just adds the spot market to that.

Many banks have a history of closing accounts of people who use crypto exchanges. Yes the answer is to open, or have, more than one bank account.

To be totally fair, it's an issue with the money laundering regulations. The government requires that banks check and prove that the funds are not as a result of criminal activity. I suspect that many honest people are both unable and unwilling to do so. At which point they often get their bank account frozen and have real difficulty accessing any funds from it.

Lloyds were, for a time the worst for this. Santander publicly state a limit upon how much you can transfer out to crypto, but I suspect that the real issue is funds coming in from a crypto exchange.

Here is just one such recent account freeze.
https://cheekycrypto.medium.com/chris-f ... 1f6ecbc923

Here is an earlier article
https://decrypt.co/122666/uk-crypto-cra ... uy-bitcoin

High-street bank Santander announced last year that it would be limiting U.K. customers from making large crypto transactions. As it stands, those who bank with Santander can make single transactions of £1,000, with a total limit of £3,000 in any rolling 30-day period.

A crypto trader who banks with Santander told Decrypt that his account was closed without warning after making withdrawals from Coinbase.

I have no intention of exceeding Santander's limits, but simply can't continue to have a couple of months worth of fiat cash in any one bank.

At this point I'm going to avoid dragging the conversation off into presumption of innocence, right to privacy, choices of money, rights to your own savings etc. They have all been extensively covered in the past and relate to this topic only in the fact that a bitcoin ETF is in many ways no different from a Physical gold or silver ETF.

[mjbdreamer]

Now you can speculate on its future value without even having to buy any.

But the fund does have to buy the underlying asset and hold it for you. It's not a fractional reserve operation today. This is behind the transaction volumes we have been seeing as the players position themselves.

Just yesterday volumes:
Grayscale - $2.3Bn
BlackRock - $1Bn
Fidelity - $700m
ARK - $288m
Bitwise - $125m

[Urbandreamer]

Now you can speculate on its future value without even having to buy any.

But the fund does have to buy the underlying asset and hold it for you. It's not a fractional reserve operation today. This is behind the transaction volumes we have been seeing as the players position themselves.

Just yesterday volumes:
Grayscale - $2.3Bn
BlackRock - $1Bn
Fidelity - $700m
ARK - $288m
Bitwise - $125m

I suspect that murraypaul is coming at it as a hard core bitcoiner, which is a bit like a hard core gold bug.

You can speculate upon the price of gold by buying a gold etf, but you don't own the gold. You own an etf, that may own gold.
You are accepting the counter party risk of that.

In the same way, there is no guarantee that in the event of problems you will get your gold. You might get the price of the gold, but not the gold. Indeed you might only get the price of the gold at the time of the problem, plus possibly any interest if it takes time to sort out. That may be less than if you had been able to keep the gold. You will see gold bugs make that sort of argument. Or, that you can flee clanking, if you need to. Historically this has actually happened with both bitcoin and gold.

I actually hold a gold etf, because I value the convenience. But it's not the same as buying coins from Chard.
Buying and holding bitcoin directly doesn't have the same costs or spread as buying gold and is quite easy. Hence arguably no real need for an individual to use an etf.

[murraypaul]

But the fund does have to buy the underlying asset and hold it for you.

The point of Bitcoin was to be used, as an alternative to existing currencies.
For people to actually buy and sell things with it.

That, of course, never actually happened, there is negligible real world usage.

And this is just another step even further from the intent. And making the price more volatile detracts from its use as a currency.

From the Bitcoin whitepaper:

Commerce on the Internet has come to rely almost exclusively on financial institutions serving as
trusted third parties to process electronic payments. While the system works well enough for
most transactions, it still suffers from the inherent weaknesses of the trust based model.
Completely non-reversible transactions are not really possible, since financial institutions cannot
avoid mediating disputes. The cost of mediation increases transaction costs, limiting the
minimum practical transaction size and cutting off the possibility for small casual transactions,
and there is a broader cost in the loss of ability to make non-reversible payments for non-reversible
services. With the possibility of reversal, the need for trust spreads. Merchants must
be wary of their customers, hassling them for more information than they would otherwise need.
A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties
can be avoided in person by using physical currency, but no mechanism exists to make payments
over a communications channel without a trusted party.

What is needed is an electronic payment system based on cryptographic proof instead of trust,
allowing any two willing parties to transact directly with each other without the need for a trusted
third party. Transactions that are computationally impractical to reverse would protect sellers
from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In
this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed
timestamp server to generate computational proof of the chronological order of transactions. The
system is secure as long as honest nodes collectively control more CPU power than any
cooperating group of attacker nodes.

Nowhere in that is the idea that the dominant purpose of Bitcoin should be as a speculative asset.

As an aside:

Someone has to hold it for you. In most cases that won't be the fund, they will outsource it to Coinbase.

Custody of Bitcoin is much more fragile, from a risk management point of view, than custody of money.

If someone hacks (or 'hacks') the custodian and transfers the Bitcoin out, it is just gone. Can't trace it to the receiving bank, can't freeze that account and ask for the money to be returned, can't take them to court. Just gone. All you are left with is trying to track it to an off-ramp, and follow from there. But as long as there are off-ramps in unfriendly countries, that won't work.

All that would be left is suing Coinbase, which would be pointless as they would at that point just go bankrupt, they couldn't cover the loss.

If the custodian screws up and loses the keys, the Bitcoin is lost forever. (That seems like an impossible thing to happen, but it has.)

That is the point of Bitcoin, but I wouldn't want to be in the risk management team of any of the companies involved.

[Urbandreamer]

But the fund does have to buy the underlying asset and hold it for you.

The point of Bitcoin was to be used, as an alternative to existing currencies.
For people to actually buy and sell things with it.

That, of course, never actually happened, there is negligible real world usage.

Well, if you are going to insist upon on chain transactions, rather than some side chain or layer 2 protocol, then transaction costs could be a factor.

https://bitcoinjobs.com/fee-calculator

Currently, it would cost $10 plus the price of the cup of coffee to buy a cup of coffee.

Of course I could have said that it would cost $10 plus the price of the car to buy a new car.

This may explain why on chain transactions are not being used to pay for cups of coffee or pints of beer.

FWIW my last lightning transaction 22,835 Sats (£5.07 at the time) cost me 19 Sats (less than 1p).

Ps, That calculator seems to be assuming worst case as I calculate it as closer to $4, assuming that you can use a single input into the transaction and current fees of about 40sat/Vbyte, but the point is still valid.

[Bubblesofearth]

Will Bitcoin ETF's suck in the last big wave of mug punters?

BoE

[Urbandreamer]

Will Bitcoin ETF's suck in the last big wave of mug punters?

BoE

No idea. They certainly won't in the UK, as you will be prohibited from buying them.

BTW, as you might expect they have been covered by financial journalists. I actually think that the A J Bell podcast did a good job.
Conclusion (bitcoin is not a company).

https://www.ajbell.co.uk/podcasts/episo ... 2024-01-12

Ps, Youtube is full of incensed Americans who's brokers won't buy them for their clients either.

[Urbandreamer]

OH.

Ok, I thought that I should share this thought with you. In the UK bitcoin is very much something that you do as an individual.

However many of us eventually die, and many have families.
Trusts, and custody do have advantages.
ETF's may in the future be an option to ensure transfer of value down the generations.

[Spet0789]

I cannot see any way for Bitcoin to be a good investment. It’s just bad at what it purports to be. It’s not a crypto currency. It’s at best a cryptocommodity. And it’s a disaster for the planet.

DLT has a huge future. It will make financial transactions instantaneous, safe and will remove the need for trusted third parties like exchanges and payments companies. Mastercard and Visa are dead meat. This is the prize. But I think that happens when a few of the major central banks agree on a protocol for CBDC. Then you have a government backed stablecoin that will actually be useful. It won’t satisfy the anarchists or guns and ammo types but they can hodl their Bitcoin while the rest of us get on with a cheaper and lower friction life.

[Urbandreamer]

But I think that happens when a few of the major central banks agree on a protocol for CBDC. Then you have a government backed stablecoin that will actually be useful. It won’t satisfy the anarchists or guns and ammo types but they can hodl their Bitcoin while the rest of us get on with a cheaper and lower friction life.

Each to their own I suppose.
BTW, people might find the experiences of this Canadian couple of interest.
"Why we left Canada permanently."
https://www.youtube.com/watch?v=hDIPIYBFI5U&t=636s

[mjbdreamer]

I cannot see any way for Bitcoin to be a good investment. It’s just bad at what it purports to be. It’s not a crypto currency. It’s at best a cryptocommodity. And it’s a disaster for the planet.

I always like to hear Bitcoin is a disaster for the planet. Compare it to banking and regular payment methods. Look at the innovative ways the energy is sourced. Look at all the alternative spin-off crypto-currency options resulting that are minimal impact. I think you'll find it is not that bad.

Looking purely as an investment opportunity as you mention you can't see it being good - if people had put $100 in when I first mentioned it ten years back, they could cash out today for over $40,000. Imagine doing that today, $100 for each of your young children or grandchildren. It will a great foundation for them.

[mjbdreamer]

Will Bitcoin ETF's suck in the last big wave of mug punters?

No, just the next wave. It'll continue long after we've gone.

[murraypaul]

I always like to hear Bitcoin is a disaster for the planet.

Maybe not a disaster, but a negative.

Compare it to banking and regular payment methods.

It uses massively massively more power per actual transaction performed.

Look at the innovative ways the energy is sourced.

Which have nothing to do with Bitcoin.

Look at all the alternative spin-off crypto-currency options resulting that are minimal impact. I think you'll find it is not that bad.

That is true.

[Urbandreamer]

Look at the innovative ways the energy is sourced.

Which have nothing to do with Bitcoin.

In one sense true, in another false.

Stranded or uneconomic energy exists. It can be economically harvested to mine bitcoin. I'm thinking of remote oil fields where the associated gas can not be sent down a pipeline. Using it to efficiently generate electricity, used locally, causes less greenhouse emissions than flaring.
I believe that WEF (the World Economic Forum) has made a video on the subject. (You know, the people who claimed that bitcoin would use the entire worlds generating capacity by three years ago, so not friends of bitcoin)

Then we have remote villages, usually in Africa, that don't produce goods valuable enough to support the investment in electricity generation. Or the maintenance of such technology. Solar farms etc, can be supported by selling surplus to bitcoin miners.
Forbes did a write up on the subject
https://www.forbes.com/sites/abubakarnu ... 3ae754acd3

Electricity grids need regulating, by temporarily changing generation or demand. Texas is a case study, for political reasons it's an energy island. Bitcoin mining can really help. Oh and yes, there are academic papers published upon the subject.

You are right. Bitcoin needs non of these things. It can be, has been, and in some cases I'm sure still is, powered by coal.
You are wrong. In the fact that the financial value of such a flexible energy demand is causing innovative energy solutions to be found and used.

[murraypaul]

In one sense true, in another false.

These are all theoretical ideas.

What is the network connection like to a remote oil field, or a remote African village too small to have electricity?

The reality is that those places are not where Bitcoin mining is actually done.

Texas is a case study, for political reasons it's an energy island. Bitcoin mining can really help.

Texas is a case study alright. Of all the wrong things.

[Urbandreamer]

In one sense true, in another false.

These are all theoretical ideas.

What is the network connection like to a remote oil field, or a remote African village too small to have electricity?

The reality is that those places are not where Bitcoin mining is actually done.

Kindly remind me of the civil war that broke out and wound up with the decision to restrict the bandwidth of the bitcoin network.

OH that's right, it was called the "Block size wars" and books have been written about it.
As you may know, the blocksize is 1Mb and there is a new one every 10 minutes. That's actually quite a low bandwidth.
If you wanted to you could easily use dialup or other low speed connection.

HOWEVER:

Of course you are also ignoring that if the bitcoin miner needs a network connection, and there are no phone lines or cell towers, then they are probably going to pay for a starlink node.
Oh, but those economic facts don't agree with your argument do they.

Facts? Well did you do any research?

https://twitter.com/gladstein/status/16 ... 4023693313
https://bitcoinmagazine.com/business/st ... ralization
https://gridlesscompute.com/

THEORETICAL!

Sure, the bulk of mining is done in the USA currently. Much in Texas. But your claim that it is NOT done in elsewhere is provably wrong.

I don't know why you expect me to do your web searches for you, but here is the WEF on the gas flaring.
https://www.weforum.org/videos/this-sta ... a-centres/

Try some research. You may find that "data centers" are going in at many remote oil sites.