From: Xin Lu
Dear members of the SEC,
My name is Xin Lu and I am a software engineer from California. I am submitting this public comment with support for this ETF.
I have watched the development of Bitcoin for several years and only recently purchased a few for personal use. I am actually using it as a method of payment and buying things with it, which I am told is a bit unusual. In the last few months I was able to buy delicious caramels, wild caught salmon, and board games with bitcoin. Additionally I seriously considered booking a cruise via Expedia. It is by no means a Ponzi scheme. It is simply another means of exchange like a currency or any other property as long as you find a counterparty for the exchange. My reasons for using bitcoin is a combination of technological curiosity and a general distrust for banks. The most recent scandal at Wells Fargo shows that millions of customers were abused, and I think my distrust of these financial corporations is becoming more mainstream. Bitcoin is a good way for people to escape these corrupt banks' tyranny if it's adopted further as a transactional and value store medium. Additionally, millions of unbanked people around the world will have a safe way to store and transfer value if Bitcoin gets wider adoption. Right now Bitcoin is being used by a small number of Venezuelans to battle their country's unrelenting inflation, and by Filipino overseas workers to remit cash home with much less egregious fees than what is levied by the existing banking system. There is already a lot of social good that is already being provided by bitcoin, and applications can only increase if more people knew about it.
Now with that said, one of the downsides with using Bitcoin right now as a currency is its volatility and I think that is due to its market cap and the current liquidity situation. Right now all of the bitcoins in the world is worth roughly 10 billion dollars. The amount of bitcoins actually available for trade and use is actually much smaller since a lot of Bitcoin users are holders and never sell. Additionally, many bitcoins may no longer be accessible due to the loss of private keys (a private key is essentially a very strong password that gives access to one's wallet). As it stands, right now traders of bitcoin could sway bitcoin price several percent with a order of just a few hundred bitcoins on many of the exchanges. This makes bitcoin hard to use as a means of transaction for merchants and consumers alike. Volatility has gone down significantly in the past couple years, but there still has been swings of over 10% in a day in the past few months. There was a report from Needham Research that showed bitcoin volatility is on par with a small cap stock. I think this ETF will bring much needed liquidity and stability to bitcoin's price, and it should encourage more people to use bitcoin as a transactional medium.
Now I do find it ironic that a technology originally created to escape fiat currency and centralized government control is now petitioning for a wrapper fund from the US government, but I think the legitimacy provided by the SEC will accelerate its adoption. Bitcoin is still known by the general public as the currency of choice of criminal enterprises, but in actual volume the US dollar is the undeniable currency of choice for all criminal activity, but it is never portrayed as such. The fact is that bitcoin, like the US dollar, is morally neutral, but bitcoin's reputation needs a boost for people to discover its usefulness.
Another point I want to make is that by allowing this fund to proceed the SEC will provide much needed competition on the market for bitcoin backed investments. Currently there is a Bitcoin based exchange traded product called the Bitcoin Investment Trust (GBTC) which trades OTC. The NAV of this fund is constantly ridiculously over the value of its underlying bitcoin holdings. As an example, today this fund closed at $92. One share is supposed to be worth about 1/10th of a bitcoin, but bitcoin is trading at around $640. This means that the NAV is almost 44% above the fund's underlying asset. I think this shows that there is at least some pent up demand for more bitcoin backed products, and I believe the SEC should be encouraging fair prices and competition by allowing the new ETF to proceed.
In closing, although I do distrust banks I still have some faith in the US government regulatory agencies to do the right things when it comes to the market. My comments come from my own understanding and experience with bitcoin and I am in no way an expert, but I believe by approving this ETF the SEC will encourage more innovation and competition in the financial world. Thank you for providing this forum for some of my thoughts.