Crypto Conversation

[Wheat/"/"/"]

Millions is a far cry from Trillions.

Definitely.

[Kdogg]

Van Eck’s filing released today shows it seeded its fund with $72 million dollars of BTC to prepare for demand.

Bitwise seeded with $500,000, but evidently has a standing order for $200 million dollars of shares upon approval.

The evidence is growing.

These are instruments for the fund originator to make money not an endorsement of BTC. They would set up funds for moon dust if they thought they could charge a management fee. I would like to see if they are “selling” into the open market or an internal slush fund because the numbers don’t add up at .20-.30%. Then there is the issue of auditing. Blackrock won’t risk it but what of these smaller players?

[Wheat/"/"/"]

Department of Justice just announced they have 120,000 BTC seized at a value of $71 million and now worth $4.2 billion.

Wonder if they’ll just hold on to it and add it to the treasury?

[Wheat/"/"/"]

These are instruments for the fund originator to make money not an endorsement of BTC. They would set up funds for moon dust if they thought they could charge a management fee. I would like to see if they are “selling” into the open market or an internal slush fund because the numbers don’t add up at .20-.30%. Then there is the issue of auditing. Blackrock won’t risk it but what of these smaller players?

Of course it’s an endorsement of BTC. Nobody would spend the money to set up these ETF’s if there was not a belief in the underlying asset.

[Kdogg]

Department of Justice just announced they have 120,000 BTC seized at a value of $71 million and now worth $4.2 billion.

Wonder if they’ll just hold on to it and add it to the treasury?

If it’s from a hack they return to the rightful owners. If it’s criminal proceeds they auction it off like any other seized item.

Got $200,000? You too can participate in the most current one.

https://www.usmarshals.gov/what-we-do/asset-forfeiture/sale-approximately-404158424932-bitcoin

[Kdogg]

Of course it’s an endorsement of BTC. Nobody would spend the money to set up these ETF’s if there was not a belief in the underlying asset.

Have you ever meet a fund manager? ETFs are setup and shut down for lack of interest all the time. Heck there is (was?) one ETF that was setup not knowing what it was investing in. It was literal called the Black Box Quant ETF. Then there was the black box ETF than invested in other black box funds.

[Wheat/"/"/"]

Have you ever meet a fund manager? ETFs are setup and shut down for lack of interest all the time. Heck there is (was?) one ETF that was setup not knowing what it was investing in. It was literal called the Black Box Quant ETF. Then there was the black box ETF than invested in other black box funds.

Want to bet a pie that there’s a lack of interest in these BTC ETF’s over the next year?

We’ll make the determination of $5 billion minimum held in these funds by January 1st, 2025 as the deciding factor.

From 0 to $5 billion, that seems fair to me.

[Kdogg]

Want to bet a pie that there’s a lack of interest in these BTC ETF’s over the next year?

We’ll make the determination of $5 billion minimum held in these funds by January 1st, 2025 as the deciding factor.

From 0 to $5 billion, that seems fair to me.

It’s a spec asset and these ETFs are a tool for betting on it. People like to gamble so that’s what it will be used for. And like any good sports book the fund will not care if it goes up or down. They get their cut either way. It’s not an endorsement of utility or the value of the assets. The measuring stick would be the price of BTC not dollars under management. If anything you are going to see downward price pressure because people can easily bet against BTC.

You seem to equate having a Bitcoin etf as some sort of seal of approval of Bitcoin. It is not. If I told you you could setup an ETF with no underlining assets would you believe? You can. It’s called a VIX etf. It’s price is determined by volatility and market sentiment. Let’s think about that for a moment.

[Wheat/"/"/"]

It’s a spec asset and these ETFs are a tool for betting on it. People like to gamble so that’s what it will be used for. And like any good sports book the fund will not care if it goes up or down. They get their cut either way. It’s not an endorsement of utility or the value of the assets. The measuring stick would be the price of BTC not dollars under management. If anything you are going to see downward price pressure because people can easily bet against BTC.

You seem to equate having a Bitcoin etf as some sort of seal of approval of Bitcoin. It is not. If I told you you could setup an ETF with no underlining assets would you believe? You can. It’s called a VIX etf. It’s price is determined by volatility and market sentiment. Let’s think about that for a moment.

So it’s a no on the pie bet?

Since I’ve seen people who don’t understand Bitcoin equate BTC with tulip bulbs, beanie babies and claim BTC is a Ponzi scheme, yea, I’d say these ETF’s and the U.S. government’s regulators approval of the asset is a seal of approval.

[Kdogg]

So it’s a no on the pie bet?

Since I’ve seen people who don’t understand Bitcoin equate BTC with tulip bulbs, beanie babies and claim BTC is a Ponzi scheme, yea, I’d say these ETF’s and the U.S. government’s regulators approval of the asset is a seal of approval.

I would say it’s more like allowing online sports gambling. Governments don’t endorse gambling they just allow it. It’s already happening so might as well make it easier to tax and track. It’s not an endorsement. Instead of meeting Vinny in a back alley or going to the local bar bookie people can just use their phones. It’s a mechanism for enforcement which is really going to go over well with the more extreme devotees.

[snowdenscold]

So I looked thru the ARK Spot ETF S1 application, and yikes, they really detail their risk factors. 48 pages worth in fact. The Blackrock one has about 40 pages.
https://www.sec.gov/Archives/edgar/d...tm#rom549524_3
https://www.sec.gov/Archives/edgar/d...0230608_s1.htm

I honestly have no idea how this compares to other ETFs, so not sure if that's unusually high or right in line.

But I thought these were worth highlighting. I cut out a bunch, and these are only the top-level descriptions as found in the application, as each item contains anywhere from a large paragraph to multiple pages underneath it. For a couple I included a selection of those details.


-------------------

PRELIMINARY PROSPECTUS

Shares

ARK 21Shares Bitcoin ETF

Risks Associated with Bitcoin and the Bitcoin network

- Bitcoin is a relatively new technological innovation with a limited operating history.
- Bitcoin generally.

There is no assurance that bitcoin will maintain its long-term value in terms of purchasing power in the future, or that acceptance of bitcoin payments by mainstream retail merchants and commercial businesses will continue to grow. The value of the Trust’s investments in bitcoin could decline rapidly, including to zero.

- Limits on bitcoin supply.
- Trading prices have ... experienced extreme volatility in recent periods ... the Shares could lose all or substantially all of their value.
- Spot markets on which bitcoin trades are relatively new and largely unregulated.
- Spot markets may be exposed to security breaches.
- Spot markets may be exposed to fraud and market manipulation.
- Spot markets may be exposed to wash trading.
- Spot markets may be exposed to front-running.
- Momentum pricing.
- A decline in the adoption of bitcoin could negatively impact the Trust.
- Irrevocable nature of blockchain-recorded transactions.
- The loss or destruction of a private key required to access bitcoin may be irreversible.
- An investment in the Trust is not a deposit and is not FDIC-insured. Shareholders’ limited rights of legal recourse against the Trust, Trustee, Sponsor, Administrator, Prime Broker and Bitcoin Custodian expose the Trust and its Shareholders to the risk of loss of the Trust’s bitcoin for which no person or entity is liable.

The Trust is not a banking institution or otherwise a member of the Federal Deposit Insurance Corporation (“FDIC”) or Securities Investor Protection Corporation (“SIPC”) and, therefore, deposits held with or assets held by the Trust are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions. In addition, neither the Trust nor the Sponsor insure the Trust’s bitcoin.

While the Bitcoin Custodian has advised the Sponsor that it has insurance coverage of up to $320 million that covers losses of the digital assets it custodies on behalf of its clients, including the Trust’s bitcoin, resulting from theft, Shareholders cannot be assured that the Bitcoin Custodian will maintain adequate insurance, that such coverage will cover losses with respect to the Trust’s bitcoin, or that sufficient insurance proceeds will be available to cover the Trust’s losses in full. The Bitcoin Custodian’s insurance may not cover the type of losses experienced by the Trust. Alternatively, the Trust may be forced to share such insurance proceeds with other clients or customers of the Bitcoin Custodian, which could reduce the amount of such proceeds that are available to the Trust. In addition, the bitcoin insurance market is limited, and the level of insurance maintained by the Bitcoin Custodian may be substantially lower than the assets of the Trust. While the Bitcoin Custodian maintains certain capital reserve requirements depending on the assets under custody, and such capital reserves may provide additional means to cover client asset losses, the Trust cannot be assured that the Bitcoin Custodian will maintain capital reserves sufficient to cover actual or potential losses with respect to the Trust’s digital assets.

- Loss of a critical banking relationship for, or the failure of a bank used by, the Prime Broker could adversely impact the Trust’s ability to create or redeem Baskets, or could cause losses to the Trust.
- A disruption of the Internet may affect bitcoin operations, which may adversely affect the bitcoin industry and an investment in the Trust.
- Potential changes to the Bitcoin network’s protocols and software could, if accepted and authorized by the Bitcoin network community, adversely affect an investment in the Trust.
- Decentralized governance of the Bitcoin network could have a negative impact on the performance of the Trust.
- Anonymity and illicit financing risk.
- The actual or perceived use of bitcoin and other digital assets in illicit transactions, which may adversely affect the bitcoin industry and an investment in the Trust.
- [Hard Fork]
- Bitcoin is subject to cybersecurity risks, which could adversely affect an investment in the Trust or the ability of the Trust to operate.
- If miners expend less processing power on the Bitcoin network, it could increase the likelihood of a malicious actor obtaining control.
- Cancer nodes.
- Double-spending risks.
- Flaws in source code.
- The Bitcoin network faces scaling challenges and efforts to increase the volume of transactions may not be successful.
- New competing digital assets may pose a challenge to bitcoin’s current market position, resulting in a reduction in demand for bitcoin, which could have a negative impact on the price of bitcoin and may have a negative impact on the performance of the Trust.
- Competition from central bank digital currencies (“CBDCs”) could adversely affect the value of bitcoin and other digital assets.
- Prices of bitcoin may be affected due to stablecoins, the activities of stablecoin issuers and their regulatory treatment.

Stablecoins are a relatively new phenomenon, and it is impossible to know all of the risks that they could pose to participants in the bitcoin market. In addition, some have argued that some stablecoins, particularly Tether, are improperly issued without sufficient backing in a way that could cause artificial rather than genuine demand for bitcoin, raising its price, and also argue that those associated with certain stablecoins are involved in laundering money.

- Operational cost may exceed the award for solving blocks or transaction fees. Increased transaction fees may adversely affect the usage of the Bitcoin network.
- Electricity usage.
- Miners could act in collusion to raise transaction fees, which may adversely affect the usage of the Bitcoin network.
- As technology advances, miners may be unable to acquire the digital asset mining hardware necessary to develop and launch their operations. A decline in the bitcoin mining population could adversely affect the Bitcoin network and an investment in the Trust.
- If profit margins of bitcoin mining operations are not high, miners may elect to immediately sell bitcoin earned by mining, resulting in a reduction in the price of bitcoin that could adversely affect an investment in the Trust.
- Large-Scale Sales or Distributions.
- Congestion or delay in the Bitcoin network may delay purchases or sales of bitcoin by the Trust.
- The Trust’s Bitcoin Custodian could become insolvent.
- Lack of recourse.

The Bitcoin Custodian has limited liability, impairing the ability of the Trust to recover losses relating to its bitcoin and any recovery may be limited, even in the event of fraud. In addition, the Bitcoin Custodian may not be liable for any delay in performance of any of its custodial obligations by reason of any cause beyond its reasonable control, including force majeure events, war or terrorism, and may not be liable for any system failure or third-party penetration of its systems. As a result, the recourse of the Trust to the Bitcoin Custodian may be limited.

Risks Associated with Investing in the Trust (9 pages)
Risks Associated with the Index and Index Pricing (2 pages)
Regulatory Risk (8 pages)
Tax Risk (2 pages)
Other Risk (2 pages)


---------

Sign me up!

[Wheat/"/"/"]

So I looked thru the ARK Spot ETF S1 application, and yikes, they really detail their risk factors. 48 pages worth in fact. The Blackrock one has about 40 pages.
https://www.sec.gov/Archives/edgar/d...tm#rom549524_3
https://www.sec.gov/Archives/edgar/d...0230608_s1.htm

I honestly have no idea how this compares to other ETFs, so not sure if that's unusually high or right in line.

But I thought these were worth highlighting. I cut out a bunch, and these are only the top-level descriptions as found in the application, as each item contains anywhere from a large paragraph to multiple pages underneath it. For a couple I included a selection of those details.


-------------------

PRELIMINARY PROSPECTUS

Shares

ARK 21Shares Bitcoin ETF

Risks Associated with Bitcoin and the Bitcoin network

- Bitcoin is a relatively new technological innovation with a limited operating history.
- Bitcoin generally.



- Limits on bitcoin supply.
- Trading prices have ... experienced extreme volatility in recent periods ... the Shares could lose all or substantially all of their value.
- Spot markets on which bitcoin trades are relatively new and largely unregulated.
- Spot markets may be exposed to security breaches.
- Spot markets may be exposed to fraud and market manipulation.
- Spot markets may be exposed to wash trading.
- Spot markets may be exposed to front-running.
- Momentum pricing.
- A decline in the adoption of bitcoin could negatively impact the Trust.
- Irrevocable nature of blockchain-recorded transactions.
- The loss or destruction of a private key required to access bitcoin may be irreversible.
- An investment in the Trust is not a deposit and is not FDIC-insured. Shareholders’ limited rights of legal recourse against the Trust, Trustee, Sponsor, Administrator, Prime Broker and Bitcoin Custodian expose the Trust and its Shareholders to the risk of loss of the Trust’s bitcoin for which no person or entity is liable.



- Loss of a critical banking relationship for, or the failure of a bank used by, the Prime Broker could adversely impact the Trust’s ability to create or redeem Baskets, or could cause losses to the Trust.
- A disruption of the Internet may affect bitcoin operations, which may adversely affect the bitcoin industry and an investment in the Trust.
- Potential changes to the Bitcoin network’s protocols and software could, if accepted and authorized by the Bitcoin network community, adversely affect an investment in the Trust.
- Decentralized governance of the Bitcoin network could have a negative impact on the performance of the Trust.
- Anonymity and illicit financing risk.
- The actual or perceived use of bitcoin and other digital assets in illicit transactions, which may adversely affect the bitcoin industry and an investment in the Trust.
- [Hard Fork]
- Bitcoin is subject to cybersecurity risks, which could adversely affect an investment in the Trust or the ability of the Trust to operate.
- If miners expend less processing power on the Bitcoin network, it could increase the likelihood of a malicious actor obtaining control.
- Cancer nodes.
- Double-spending risks.
- Flaws in source code.
- The Bitcoin network faces scaling challenges and efforts to increase the volume of transactions may not be successful.
- New competing digital assets may pose a challenge to bitcoin’s current market position, resulting in a reduction in demand for bitcoin, which could have a negative impact on the price of bitcoin and may have a negative impact on the performance of the Trust.
- Competition from central bank digital currencies (“CBDCs”) could adversely affect the value of bitcoin and other digital assets.
- Prices of bitcoin may be affected due to stablecoins, the activities of stablecoin issuers and their regulatory treatment.



- Operational cost may exceed the award for solving blocks or transaction fees. Increased transaction fees may adversely affect the usage of the Bitcoin network.
- Electricity usage.
- Miners could act in collusion to raise transaction fees, which may adversely affect the usage of the Bitcoin network.
- As technology advances, miners may be unable to acquire the digital asset mining hardware necessary to develop and launch their operations. A decline in the bitcoin mining population could adversely affect the Bitcoin network and an investment in the Trust.
- If profit margins of bitcoin mining operations are not high, miners may elect to immediately sell bitcoin earned by mining, resulting in a reduction in the price of bitcoin that could adversely affect an investment in the Trust.
- Large-Scale Sales or Distributions.
- Congestion or delay in the Bitcoin network may delay purchases or sales of bitcoin by the Trust.
- The Trust’s Bitcoin Custodian could become insolvent.
- Lack of recourse.



Risks Associated with Investing in the Trust (9 pages)
Risks Associated with the Index and Index Pricing (2 pages)
Regulatory Risk (8 pages)
Tax Risk (2 pages)
Other Risk (2 pages)


---------

Sign me up!

Looks like the lawyers just doing their job and attempting to cover the behind’s of the issuer’s of the EFT’s for any contingencies they can envision. To be expected.

That said, a Bitcoin investment is not for the faint of heart. There are a lot of unknowns that can affect the value of the asset. This is not a mature market you can be comfortable with at this time. Early adopters take on more risk.

I’m way more comfortable holding my own private keys to my cold storage wallet than I would be buying one of these funds with all the expenses and counterparty risks, or leaving my BTC on any exchange. Institutions and people who don’t want to do the work of self custody will accept allowing the funds to take on custody responsibilities.

For those considering investing in BTC, I’d recommend doing the homework to really understand BTC, how to self custody the asset yourself, use only funds you can afford to lose with a 5 year minimum plan to hold…. .and hang on for the ride.

[OldPhiKap]

Looks like the lawyers just doing their job and attempting to cover the behind’s of the issuer’s of the EFT’s for any contingencies they can envision. To be expected.

There seems to be a few dozen risks identified. Which ones do you think are just lawyers making up unrealistic risks?

I agree that this is lawyers doing their job. I disagree that it is a bad thing for the investing public or is just CYA.

And the fact that these ETFs are about to be issued is far from an endorsement by the SEC. They opposed it, but a court ordered them to do it. https://www.cnbc.com/2023/10/13/us-s...urce-says.html

[Wheat/"/"/"]

There seems to be a few dozen risks identified. Which ones do you think are just lawyers making up unrealistic risks?

I agree that this is lawyers doing their job. I disagree that it is a bad thing for the investing public or is just CYA.

I don’t think it’s a bad thing for this SEC required paperwork to make clear all the risks possible of an asset to the investing public, no matter how unlikely they may be. People deserve the most information possible to form an investment decision.

And for the issuer’s, it’s wise to CYA.

I don’t see any of those BTC risks as very likely, but I clearly see where some are possible.

Many people here probably have shares of a gold ETF. Below is a link to GLDM’s ETF filing, which also lists about every risk the lawyers could think of for gold investors. Standard operating procedure I’d say for all ETF applications.

Gold Risk factors from SEC S-1 filing

[Kdogg]

I don’t think it’s a bad thing for this SEC required paperwork to make clear all the risks possible of an asset to the investing public, no matter how unlikely they may be. People deserve the most information possible to form an investment decision.

And for the issuer’s, it’s wise to CYA.

I don’t see any of those BTC risks as very likely, but I clearly see where some are possible.

Many people here probably have shares of a gold ETF. Below is a link to GLDM’s ETF filing, which also lists about every risk the lawyers could think of for gold investors. Standard operating procedure I’d say for all ETF applications.

Gold Risk factors from SEC S-1 filing

There is a 30 page difference in the risk factors between the two.

[Wheat/"/"/"]

There seems to be a few dozen risks identified. Which ones do you think are just lawyers making up unrealistic risks?

I agree that this is lawyers doing their job. I disagree that it is a bad thing for the investing public or is just CYA.

I don’t think it’s a bad thing for this SEC required paperwork to make clear all the risks possible of an asset to the investing public, no matter how unlikely they may be. People deserve the most information possible to form an investment decision.

And for the issuer’s, it’s wise to CYA.

I don’t see any of those BTC risks as very likely, but I clearly see where some are possible.

Many people here probably have shares of a gold ETF. Below is a link to GLDM’s ETF filing, which also lists about every risk the lawyers could think of for gold investors. Standard operating procedure, I’d say.

Gold Risk factors from SEC S-1 filing

[Wheat/"/"/"]

There is a 30 page difference in the risk factors between the two.

Probably because it’s more risky than gold ETF’s.

[Wheat/"/"/"]

Good discussion today on CNBC regarding the pending approval of Bitcoin ETF’s.

22 minutes long but worth the time.

[duke74]

A bit of irony in the fact that the SEC Twitter (X) account was hacked and pronounced a bogus approval of the EFTs (with the resultant price swings of Bitcoin) - just a few short weeks after its own cyber disclosure rules relating to registrants became effective. Gensler et. al. was fast and furious yesterday overcoming that misinfo.

[duke74]

I don’t think it’s a bad thing for this SEC required paperwork to make clear all the risks possible of an asset to the investing public, no matter how unlikely they may be. People deserve the most information possible to form an investment decision.

And for the issuer’s, it’s wise to CYA.

I don’t see any of those BTC risks as very likely, but I clearly see where some are possible.

Many people here probably have shares of a gold ETF. Below is a link to GLDM’s ETF filing, which also lists about every risk the lawyers could think of for gold investors. Standard operating procedure I’d say for all ETF applications.

Gold Risk factors from SEC S-1 filing

When I was an active audit partner at Deloitte, I was the partner on GLD - the first, and at one time (and maybe now) the largest, Gold ETF. Was sponsored by the World Gold Council (trade org) to enhance liquidity in the gold market and private ownership.