Winklevoss Twins and the First Bitcoin Fund: Why It Matters

July 3rd, 2013 → 6:05 am @

The Winklevoss Twins, infamous for their role in the creation of Facebook, have filed with the United State’s securities regulators to open a Bitcoin fund that would be similar to buying a Gold ETF.  For Bitcoin, this is a huge deal.

Winklevoss Twins BitcoinThink about what would happen if a Bitcoin fund were to become a reality.  First, easy liquidity.  You can buy into Bitcoin with the same brokerage account you use to buy ETFs for Gold or the S&P 500.

Currently, there is no simple way to buy and sell Bitcoins online.  A person must create an account on a Bitcoin Exchange.  Next, they must fund this account with a bank account.  By the time the person is able to actually purchase and sell Bitcoins, it has been several days, making it a non-liquid investment for traders looking to hold short-term. Increased exposure to trading (and therefore exposing Bitcoin to more people) will result in potential rises in value for Bitcoin.

Second, and possibly an even larger deal, is that IF (and that’s a huge if) the Bitcoin fund goes through, THE US GOVERNMENT IS OPENLY RECOGNIZING BITCOIN.  By allowing people to buy into Bitcoin on a public stock exchange, the government is essentially acknowledging that Bitcoin is legitimate.  Many critics of Bitcoin have stated that, if the government decides to outlaw Bitcoin, the currency would crash.  By having securities regulators accept a Bitcoin Fund, the chances that the United States will outlaw Bitcoin diminish greatly.  Skeptics of Bitcoin will have one less reason to doubt the currency and this will help to counter some of the harmful myths that surround Bitcoin.

However, what are the chances the Bitcoin Fund will become a reality?  In my opinion, I think there is certainly a decent chance.  This is an opportunity for the government to regulate and place boundaries on Bitcoin.  For owners of Bitcoin, this could mean more stability.  For the government, this could make it easier to collect taxes and protect their interests as Bitcoin gains popularity.

Source: NY Times

photo credit: zcopley

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