Winklevoss Bros: Beware Bitcoin ETF Risks

November 18, 2014 After the demise of Mt Gox, why should investors have confidence in the infrastructure of bitcoin?

An investment in the bitcoin ETF is an investment in the future performance of bitcoin and the underlying bitcoin protocol, not an investment in a bitcoin company. That said, the infrastructure of bitcoin is far greater than a single company, and we saw that when the price remained stable even after the Mt. Gox collapse.

Contrarily, following the demise of Bear Sterns and Lehman Brothers, there was significant turmoil in the financial markets. The entrepreneurs and venture capitalists building bitcoin companies today are the best in the world, unlike a few years ago, when bitcoin was relatively unknown. Do you see the rise of dollar-based electronic payment systems (PayPal, Apple Pay) as a threat to bitcoins?

No. Those systems are closed, centralized and based on the rails of the legacy financial system.

Bitcoin is an open-source decentralized technology that not only reduces costs and friction associated with existing transaction types such as credit cards, wire transfers, etc., but enables a whole new set of transactions including micro and nano payments that existing payment technologies are unable to contemplate, let alone address. Who should own a bitcoin ETF, and why?

Investors interested in the exposure to bitcoin, but who do not want to acquire or store their own bitcoin, would be interested in a bitcoin ETF. Also, investors who prefer to buy and sell securities on the Nasdaq and do not want to purchase bitcoin from an unregulated exchange would also be interested.

A bitcoin ETF would also appeal to investors who understand the risks and would like to gain exposure to bitcoin as an asset class; and investors who invest in gold or other commodity ETFs.


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