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Bitcoin Bulls and Bears

Big Money Holding Bitcoin – Bits & Pieces #17

The Bitcoin community learned over the last few days that the Bitcoin Investment Trust (BIT) will become the world’s first publicly traded Bitcoin fund. On one hand, that’s pretty darn cool. Lots of people out there might start considering Bitcoin more legitimate when they see that a Bitcoin fund has approval from FINRA and can be listed on exchanges just like stocks. A closer look, however, reveals some details that make me slightly uneasy.

The BIT homepage has something like a mission statement plastered front and center.

The Bitcoin Investment Trust (BIT) is a private, open-ended trust that is invested exclusively in bitcoin and derives its value solely from the price of bitcoin. It enables investors to gain exposure to the price movement of bitcoin without the challenges of buying, storing, and safekeeping bitcoins.

Wait. The fund’s managers want people to invest in Bitcoin without learning how to buy and store it? Don’t get me wrong, those tasks can be a huge pain, but if an investor is unwilling to take on even the basic “challenges” of cryptocurrency, then why is he investing it?

In most cases, the only real reason has to be that the investor wants to make money. That too is not necessarily a bad thing – I’m a capitalist; of course I want people to make money – but it seems sketchy to me when uninformed rich people try to make even more money simply by holding Bitcoin.

This represents a difficult conflict for me that I don’t think I’ll be able to fully resolve in this post. As a liberty-oriented individual, I think people should be allowed to do whatever the hell they want with their money. If a rich guy is able to buy a ton of Bitcoin (even when he knows nothing about it) and manipulate the exchange rate to his advantage, so be it. Theoretically, anyone who loses money as a result of this manipulation should have exercised enough wisdom to avoid that sort of trap.

That said, I don’t think I could really call this kind of investment a good thing for Bitcoin. Sure, the rich people might drive the price up when they buy a ton of coin (the BIT’s minimum investment is $25,000), but that can’t last forever. If they plan to simply cash out down the road, the price is bound to revert, which will probably cause a net loss for casual investors.

I know it can be considered bad style to not take a stance when writing, but I’ve got to be honest here. I can’t decide if public bitcoin funds are a good thing or a bad thing. So I’m asking you: What do you think?

Maybe money is so powerful that huge investments early on can provide benefits that outweigh the costs during a later sell off. Then again, these investors are simply buying Bitcoin to hold it. They’re not necessarily lending money to promising companies – like when people buy stocks – so what good can their investments really do? In fact, when they buy Bitcoin, their money is technically going to someone who is getting rid of Bitcoin. Is that a good thing?

You know the drill and it’s especially important this week. Drop a comment below and let me know what you think. I need help here.

4 comments

  1. That said, I don’t think I could really call this kind of investment a good thing for Bitcoin. Sure, the rich people might drive the price up when they buy a ton of coin (the BIT’s minimum investment is $25,000), but that can’t last forever. If they plan to simply cash out down the road, the price is bound to revert, which will probably cause a net loss for casual investors.

    Very well quoted and good analysis . Please mention your name also in your blogs

  2. I think any news not related to a hack or an exchange collapse is good news for Bitcoin. When you realize the size of the markets that Bitcoin will disrupt and capture it is just the beginning .
    The infrastructure is already in place via the Internet, not only that but phones will be a bank in your pocket and no one will even need Internet access to use Bitcoin.
    The network effect is in full force and you will look back at this minor concern in the future and giggle

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