Bitcoin ETF Inching Closer To Reality

As a digital currency, bitcoin has been praised for its ability to circumvent traditional transaction networks and function as an independent peer-to-peer payment solution. 

While that may sound like a revolutionary concept, detractors have pointed out that the lack of regulation leads to volatile price swings and uncertain security measures.

This uncertainty has so far prevented bitcoin from becoming a mainstream investment class for all but the most speculative traders. 

To break down those barriers, the Winklevoss twins (of Facebook fame) have filed SEC documents to register the first bitcoin related ETF called the Winklevoss Bitcoin Trust. 

While the SEC has recently made cautious statements about the use of bitcoin and other digital currencies, they appear to be allowing the regulatory process for the bitcoin ETF to proceed. 

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Last month, the Winklevoss Bitcoin Trust filed its latest update that stated the ETF would trade on the NASDAQ exchange with a ticker symbol that has yet to be determined.

In theory, a bitcoin ETF would allow investors the opportunity to participate in the daily price movement of an index the twins created called the Winkdex. 

According to the SEC filing, the ETF is “designed for investors seeking a cost-effective and convenient means to gain exposure to bitcoins with minimal credit risk.”

The Winklevoss Bitcoin Trust is designed to hold bitcoins and issue baskets of shares in exchange for deposits.  Conversely it will distribute bitcoins in connection with investor redemptions. 

The bitcoins held by the trust will be stored in a digital wallet format and the custodian will be responsible for the safekeeping of these assets. 

Bitcoins are currently used in tens of thousands of transactions per day and recent quotes put the value of a single unit near $650. 

In the fourth quarter of 2013, the price of bitcoin skyrocketed to over $1,000.00 per unit which attracted a great deal of attention from currency and investment experts. 

While many experts are skeptical about the liquidity and transactional aspects of a bitcoin ETF, a successful roll-out of this concept may ultimately provide another level of confidence for investors that are drawn to this theme. 

It may also pave the way for new digital currencies to be accepted into the mainstream.