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U.S. Bitcoin Trust Investing

Written By Brian Hicks

Posted September 27, 2013

If you’ve been eyeing Bitcoin with investing fever but haven’t taken the step into that realm because of the difficulty involved, you are in luck. There’s an upstart stock exchange by the name of SecondMarket that is eliminating the hard part of Bitcoin investing with the Bitcoin Investment Trust (BIT).

bitcoin pileAccording to SecondMarket:

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.

The BIT is a lot like the SPDR Gold Trust ETF (NYSE: GLD). When people want to invest in gold but don’t want to store large amount of bars, they can still invest in it indirectly with the ETF. The idea is that you make the investment while the company takes care of the rest. It buys and stores it, and you sit back and reap the benefits.

Barry Silbert, who is the chief executive of SecondMarket, told the New York Times:

If you speak with people who have tried to purchase bitcoin in the past – you’ll hear, ‘it’s a difficult process,’ ‘it’s a confusing process,’ ‘it’s a scary process.’ We want to make it an accessible asset class.

Of course, while Silbert wants to make it an “accessible asset class,” not every investor can use the trust. It’s only for accredited investors – people who meet the Securities and Exchange Commission (SEC) wealth threshold. This means having a net worth of a million dollars – not including primary residence – or an annual income of $200,000+ for the past two years.

The average investor isn’t going to be able to purchase shares of SecondMarket’s BIT; however, they may be allowed to buy shares of the Winklevoss ETF.

You may know Cameron and Tyler Winklevoss from their lawsuit against Mark Zuckerberg for the idea behind Facebook. Now the twins are trying to find the next big thing in Bitcoin.

They Winklevoss ETF is much like the BIT, but it is going to be traded publicly if it receives approval from the SEC. The ETF is currently going through the long and complicating process of review so that it meets federal regulations.

How BIT and the Winklevoss ETF Differ

While the BIT and the Winklevoss ETF are doing the same thing – offering the opportunity to invest in Bitcoin without actually holding it – they are different. BIT will only be for the “accredited investor,” but the Winklevoss ETF will be for everyone interested. That’s what the brothers want, but it may not be easy to get that passed by the SEC.

The unfortunate thing for the Winklevoss brothers is that SecondMarket’s BIT is already way ahead of them. SecondMarket is already raising money with $2.25 million so far, and it will be ready to have investors start trading in early 2014.

And since BIT is only for accredited investors, it will receive much more money in investments early on and over time. The Winklevoss ETF will lose many of these major investors to BIT, which means it loses out on their money.

The Winklevoss brothers are going to have to come up with something unique to gain those wealthy investors, or they may end up missing the Bitcoin investment fund boat as they did with the Facebook one.

Should You Invest in Bitcoin?

The Winklevoss brothers are interested in Bitcoin because they sense it’s going to be the next big thing. They were right about Facebook; they were just behind the ball. SecondMarket, meanwhile, is a successful exchange. With these two factors coming into play, it’s likely that in a few years, Bitcoin funds will be part of most investors’ portfolios in one way or another.

If you’re an accredited investor and you’re interested in BIT, you can find all of the information you need on the SecondMarket website. It has a detailed presentation about Bitcoin and BIT, and you can request information. You can even have someone call you to discuss it.

But if you’re like most investors, the Winklevoss ETF may be more for you. Wealth Daily will provide updates as the ball gets rolling on this public fund.


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