Friday, August 2, 2013
Berkshire Hathaway, A welcome example of Value Based Sustained Growth
Monday, July 15, 2013
Will a Bitcoin ETF acting as a derivative for actual data token's drive Bitcoins price?
The Winklevoss twins of Facebook (FB) fame intend to launch a new ETF to track the price of Bitcoins, an online cryptocurrency that enjoyed a meteoric rise during bank crises in Europe. Bitcoin is an anonymous, peer-to-peer currency that is used for everything from purchasing electronics to money laundering and drug purchases. One of the biggest marketplaces for Bitcoin is a site called Silkroad, where users spend Bitcoin on everything from cocaine to ecstasy.
Said another way, Bitcoin is a currency that is "backed" by illegal activity – that's what keeps it so popular.
Is Bitcoin investable?
The main draw to Bitcoin is that it cannot be endlessly inflated – Bitcoins are "created" at a normalized pace until the total market size eventually caps itself at 21 million Bitcoins. That's the draw for most speculators. If Bitcoin were to become a real currency of the future, a limit of 21 million digital coins would make each coin tremendously valuable.
But there are questions about its legitimacy and investability. For one, it's an asset that really isn't; Bitcoins are just data on a network. Secondly, there are huge concerns about the potential legal challenges to Bitcoin. If Bitcoin is used to skirt taxes, buy drugs, and launder money, what government would want people to participate in it?
Why an ETF is a terrible idea
An ETF to track Bitcoin will add liquidity to the market. Currently, only about $10 million of Bitcoin trade hands daily on sites like Mt Gox, an online exchange site to convert dollars into digital coinage. Thus, like junk bonds and other thinly-traded instruments, a liquid ETF will essentially be seen as the market for the underlying because the ETF is more liquid than the underlying. That is to say that the derivative (the ETF) will lead the market for Bitcoin.
If this is your first foray into ETFs, you probably haven't seen what ETFs can do to a market. Just a few years ago, new ETFs for palladium and platinum were brought to the market to make commodities as available to retail investors as they are to institutional investors.
These ETFs, which bought the physical metal to hold in their own vaults, quickly drove the market for palladium and platinum. You can see the 2010 spike in platinum and palladium following the launch of these ETFs, ETFS Physical Palladium Shares (PALL) and ETFS Physical Platinum Shares (PPLT).
Platinum and palladium are two industrial metals used primarily in the automotive industry. While they certainly aren't a gold or silver, they're heavily traded on commodity exchanges around the world. However, the release of a small, sub-$1 billion ETF was enough to send prices reeling in short order.
Now consider what a new ETF would do to Bitcoin, a cryptocurrency with average daily volume hardly worthy of mentioning. Should this ETF launch with even modest fanfare, the underlying will rocket in value. There are 11,383,350 Bitcoin in existence at a price of roughly $70. Thus, the total market cap sits at less than $800 million.
So what happens when an ETF of any size…say, $200 million, comes into a market valued at a total of $800 million?
Prices skyrocket – If a sizable ETF were to launch in the next few months, prices for coins would necessarily skyrocket as it comes into the market to purchase Bitcoin for the fund.
Tracking errors ignite – Remember that an ETF share can be created or redeemed in a fraction of a second, but the major Bitcoin exchanges process transactions in the millions of dollars each day. A Bitcoin ETF is built on top of an illiquid market. The microcap ETFs stand as evidence that you can't build a quality investment in illiquid securities.
-Article Authorship not Attributed to Ethan Weibman
Thursday, July 11, 2013
The More Plausible Federal Tarper Strategy Starts With a Question
Sunday, July 7, 2013
The Bitcoin Foundation finally has grownup and taken its well sourced fists up in full Offense to Washington
Saturday, July 6, 2013
Memory Investing
NAND flash supply will stay tight through Q3 thanks to strong smartphone/tablet and data center SSD demand, Digitimes reports. Also, mobile DRAM supply is also expected to "fall short of demand" in Q3. That's music to the ears of Micron (MU +0.5%) and SanDisk (SNDK +0.9%), who have been benefiting from restrained capex and industry consolidation. NAND controller vendor Silicon Motion (SIMO +3.2%) blamed tight NAND supply for memory card/flash drive makers when issuing a Q2 warning on Tuesday; while adding embedded NAND controller sales are strong. Samsung (SSNLF.PK) just warned its Q2 profits will miss estimates, but that likely has to do with phone sales rather than DRAM/NAND demand. (Micron production shifts)
EPWVC Fund.
Thursday, July 4, 2013
The next Level in the Bitcoin Mining
Cryonic FrostBit™ Bitcoin Miner Unveiled to Consumers
1TH/s $14,995.00USD Nitrogen Cooled ASIC Miner
Dethroning BFL 500GH/s Miner at nearly half the cost...and it can be used for 3D rendering when the arms race is over.
Bitcoin London Conference Coverage
Thursday, June 27, 2013
Part 1: The Green Power Bubble that must Break off into another Bubble Before Popping
U.S. Silica Holdings: Energy Boom Should Power Shares Higher Thu, Jun 27 about: SLCA U.S. Silica Holdings (SLCA) is a small (market capitalization ~$1.1B) frac sand player I first covered around this time last year when shares were trading hands at $12 a share. I speculated the stock could double in an article on June 18th, 2012. The shares then rocketed past $28 a share earlier this year but have since fallen back to $20 a share currently. After making a huge gain after selling m... Full Story @ EPW Venture Capital