So I have a hypothetical situation, and Im interested in this communitys input, this is the economic speculation thread after all.
lets say someone has 1% of all Bitcoin.
lets say they create a Bitcoin ETF, and sell shares to that ETF on the NASDAQ. It takes off. Over time the holding in the ETF go up and down the total holdings never Drop below 1%
In this scenario the ETF Charter promise to back the ETF with Bitcoin it guarantees on redemption to pay in USD at market rate and only under special circumstances will it pay out in BTC.
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In this hypothetical situation an SC-coin-it has been created, it is Open Source, it has proven utility and security, faster transfer times, it is highly liquid, in fact it is the preferred transfer of value coin for salarys and typical larger expenses like TVs and high end consumer goods because of its faster confirmation times, People still use Bitcoin for purchases like cars and houses and even pay their loans in BTC yacht for BTC are selling will in this hypothetical scenario, in fact BTC is used for larger deals where instant transfer times are not a risk. But the SC-coin-it is the preferred means of exchange for anything of value that is relinquished at the point of sale.
What happens when the ETF, knowing they have 1:1 2wp redemption capability with the SC-coin-it, and 1% of all bitcoins that are stagnant start to leverage their BTC, they are still in theory backed by BTC, but start lending out SC-coin-it to AAA rated entities, they haven't broken there charter due the technicality that the BTC is secure, and they are not lending their BTC ?
owners Winkelvii go to jail for violating their charter b/c scBTC is essentially one in the same as BTC and they weren't supposed to lend them out.
so are Gold ETF charters written in such a way that the gold can not be lent out?
don't know for sure but you can bet on it.
this "paper gold" is it in effect just CB's that lend it out, or with fractional reserves, where does it come from?
GLD buys it and stores it in a vault.
I was under the impression that there was more paper gold in circulation than there is actual gold in vaults, is that not the case? is all paper gold a 1:1 ratio?
ETF aren't typically 1:1 because there are costs of management and they pay themselves and their legal fees out of the fund.
This is from the Winklevoss ETP s-1 filing with the SEC:
http://www.sec.gov/Archives/edgar/data/1579346/000119312513279830/d562329ds1.htm#tx562329_19(the "sponsors" are a wholly owned company by the Winklevoss)
The Sponsors Fee will accrue daily and will be payable in kind (in Bitcoins) monthly in arrears. To pay the Sponsors Fee, the Trust will transfer Bitcoins from the Trust Custody Account to an account maintained by the Trustee for the Sponsor (Sponsor Custody Account). The Sponsor, from time to time, may waive all or a portion of the Sponsors Fee at its discretion for stated periods of time. The Sponsor is under no obligation to continue a waiver after the end of such stated period, and, if such waiver is not continued, the Sponsors Fee will thereafter be paid in full. Presently, the Sponsor does not intend to waive any of its fee. The Trustee will from time to time deliver to the Sponsor Custody Account Bitcoins in such quantity as may be necessary to permit payment of the Sponsors Fee. The Trustee may from time to time transfer from the Trust Custody Account and deliver to a segregated account of the Trustee (Trust Expense Account) Bitcoins for sale in such quantity as may be necessary to permit payment of Trust expenses not assumed by the Sponsor. Accordingly, the number of Bitcoins to be transferred and sold will vary from time to time depending on the level of the Trusts expenses and the Blended Bitcoin Price. See Business of the TrustTrust Expenses.
Each delivery or transfer of Bitcoins by the Trust to pay the Sponsors Fee or other expenses will be a taxable event to Shareholders.
