Why the Winklevoss Bitcoin ETF Is a Game-Changer

Investing in Bitcoin isn't as easy as investing in stocks - right now.

But the arrival of the Winklevoss Bitcoin ETF - an exchange-traded fund developed by twins Cameron and Tyler Winklevoss - will change that.

bitcoin etf winklevoss

The Winklevoss Bitcoin ETF will make investing in Bitcoin as simple and straightforward as buying shares of any other exchange-traded fund.

While there are two other Bitcoin funds - Bitcoin Investment Trust, by SecondMarket, and a hedge fund, Pantera Bitcoin Advisers LLC, by Pantera Capital - both are open to wealthy investors only.

When the Winklevoss twins filed to register their Bitcoin ETF last year, they said the purpose was to make Bitcoin investing available to anyone with a brokerage account.

"The Trust brings Bitcoin to Main Street and mainstream investors to Bitcoin," Tyler Winklevoss told The New York Times. "It eliminates the friction of buying and reduces the risks associated with storing Bitcoin while offering similar investment attributes to direct ownership."

Here's how the Winklevoss Bitcoin Trust would work...

A Winklevoss Bitcoin ETF Makes Sense

The Winklevoss Bitcoin ETF would work in a similar way to commodity-based ETFs like those for gold and silver, with the Trust buying 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.

Since being filed last July, the Winklevoss Bitcoin ETF, officially known as the Winklevoss Bitcoin Trust, has been under review by the U.S. Securities and Exchange Commission (SEC).

But it keeps inching closer to approval.

Just this week, the lawyer who drafted the proposal for the Bitcoin ETF, Kathleen H. Moriarty, a partner at Chicago-based law firm Katten Muchin Rosenman LLP, told Bloomberg News that the process is "progressing nicely and [approval] might occur at the end of 2014."

And the approval of the Winklevoss Bitcoin Trust - which appears to be a question of when, not if - should be on the radar of every investor, because of what will happen after it goes live...

Investing in Bitcoin Is About to Explode

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.

In an appearance on CNBC last year, the Winklevoss twins said they believed Bitcoin prices could soar all the way to $40,000 per coin in the next couple of years - an increase of nearly 500% from the Bitstamp price of about $805 Wednesday afternoon.

Of course, the Winklevoss Bitcoin ETF won't be responsible for that kind of price action all by itself, although it is one piece of the puzzle.

Barry Silbert, the chief executive officer of SecondMarket, sees a lot of major players making 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.

Are you investing in #Bitcoin? How high do you think it could go? Are you as optimistic as the Winklevoss twins? Weigh in on Twitter @moneymorning or Facebook.

Bitcoin has defied its critics over and over again. Just recently, two major governments tried to curb the use of the digital currency - and failed utterly. Here's why governments and central banks can't stop Bitcoin...

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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