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Winklevoss Twins Aim to Take Bitcoin ETF Public

Cameron and Tyler Winklevoss, the famous Harvard-educated twins known for their highly publicized legal battle with Facebook, have filed with the SEC to form a Bitcoin trust, which could
Joe Goldman is a staff writer for Equities.com. He is currently working towards his business degree at the University of Southern California’s Marshall School of Business and minors in economics and sports media. At USC, he worked in marketing and sales for the USC Athletic Department. He also worked as a writer for Bleacher Report, where he wrote and published articles of all sports-related topics. Joe has a natural interest in finance, as he traded his first stock in the 7th grade. Writing for Equities.com is his first experience in financial writing, and he hopes to further develop his finance knowledge and writing skills.
Joe Goldman is a staff writer for Equities.com. He is currently working towards his business degree at the University of Southern California’s Marshall School of Business and minors in economics and sports media. At USC, he worked in marketing and sales for the USC Athletic Department. He also worked as a writer for Bleacher Report, where he wrote and published articles of all sports-related topics. Joe has a natural interest in finance, as he traded his first stock in the 7th grade. Writing for Equities.com is his first experience in financial writing, and he hopes to further develop his finance knowledge and writing skills.

Cameron and Tyler Winklevoss, the famous Harvard-educated twins known for their highly publicized legal battle with Facebook, have filed with the SEC to form a Bitcoin trust, which could eventually hit public markets as an ETF.

The “Winklevii” have publically expressed their bullishness on Bitcoins, a crypto-currency that exists without the influence of central banks and governments. According to CNET, the twins own one percent of the 11 million Bitcoins in circulation. The official Winklevoss Capital website also highlights Bitcoins as one of its four most significant investments.

Over the last two years, the dollar value of one Bitcoin jumped from $1 in 2011 to over $250 in April 2013. One Bitcoin now trades just south of $90, and the Winklevoss Bitcoin Trust hopes to give the public a piece of this volatile price action.

The idea of a Bitcoin ETF, and Bitcoins in general, is both controversial and ambitious. The true value of one Bitcoin is tough to gauge because it isn’t financially backed by any tangible assets and can’t be exchanged for most goods on the open market. Bitcoins are also the currency of choice for online black market transactions because they are secured through military grade cryptography. Many people, therefore, argue that Bitcoin is a bubble and has no business being described as a “currency.”

However, the Bitcoin bulls present a strong case as well. Legitimate websites such as Word{ress and Reddit now accept Bitcoins as payment. Bitcoins are “printed” through algorithmic mining and are now traded via online exchanges, just like a normal currency. Thus, with transfer fees low and transactions extremely easy, many believe that Bitcoin could become the first “world currency,” bringing money exchange into the 21st century.

The Winklevoss twins hope to lead this charge. “The investment objective of the Trust is for the Shares to reflect the performance of the Blended Bitcoin Price of Bitcoins, less the expenses of the Trust’s operations. The Shares are designed for investors seeking a cost-effective and convenient means to gain exposure to Bitcoins with minimal credit risk,” according to the SEC filing, which proposes an aggregate offering price of over $20 million.

However, the filing acknowledges that the government may not approve the trust. “The Sponsor believes that, on balance, the important features of Bitcoins and other Digital Math-Based Assets are those that are characteristics of commodities…[However,] it is not known whether US or foreign regulators will share this view.”

The filing also lays out 18 pages of risk factors, such as Bitcoin’s lack of utilization in the retail industry, volatile price swings, possible currency manipulability, and many others. Thus, the Winklevoss Bitcoin Trust has multiple hurdles it needs to clear before gaining SEC approval.

Are Bitcoins be the next bubble or is the digital currency the beginning of a new revolution? Only time will tell, but Cameron and Tyler Winklevoss strive to serve an instrumental role in Bitcoins adoption as a legitimate, global digital currency.