September 25, 2019
Hello Here is my comment regarding Notice of Filing of Proposed Rule Change to Amend NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares) and to List and Trade Shares of the United States Bitcoin and Treasury Investment Trust under NYSE Arca Rule 8.201-E [Release No. 34-86195; File No. SR-NYSEArca-2019-39] I am speaking here as a citizen of the UK and HK. I am not a US person of citizen, and I live in Hong Kong. As far as I understand the SEC is open to comments from any members of the public regardless of citizenry, however if this is not the case please disregard by comment and ignore my rationale with my appologies (this is not intended to be part of my comment). I am of the opinion that allowing an ETF that will generally be long bitcoin is entirely inappropriate at this particular point in time _______________________________________________________________________________________________________________ The reason for this is not only that the public at large does not understand what bitcoin is, hut most current investors in bitcoin do not understand this either. Bitcoin is, in its current manifestation (and this applies to all extant coins), simply a decentralised Ponzi scheme. Yes there is no grand architect of the plan but that's what I mean by it is decentralised. In a sense everyone who bought bitcoin (apart from those at the very top and very bottom) is both Charles Ponzi and the victim of the scam. Here is what I mean by this: Take 1 bitcoin. What recourse do you have to anything by holding this token. You have no recourse to anything at all. You do not have recourse to the network that created it, and you don't have recourse to the transaction fees (the miners of the coin have recourse to this forever). So what do you have? Sadly you basically have nothing at all. There is nothing that you own and nothing that you can do with the bitcoin except for one thing. That thing is the ability to notarise a large number of transactions or events with the bitcoin. Some have argued that this has intrinsic value in and of itself. This is untrue, as blockchain technology has made notarisation essentially free and therefore you still have no intrinsic value here. Bitcoin has demonstrated in its price action that it has little fundamental value. It has continually exhibited classic bubble economics which tends to only happen to assets which cannot be fundamentally valued, or for companies that are very new. Given that soon bitcoin will have been extant for a decade, it is ridiculous to assume that there is anything fundamental here given that it is still able to move so extremely on relatively little fundamental news. Some have argued that the size and power of the network should be a way to work out the value of bitcoin (through the enterprise value of said network), however this is problematic given that bitcoin gives no recourse to anything. But let us just take this premise as a given for the moment. The maximum number of transactions that bitcoin can undertake is 6 or 7 at the very best. This hasn't changed much over time (which should be concerning), and if we are to compare this transaction network with say Mastercard (which has maybe 40k maximum transactions per second) meaning that the value of the bitcoin network should be 1/5700 (approximately) of that of Mastercard. Mastercard as of the time of writing has around 271BN USD in market cap. Therefore the value of the bitcoin network should be around 0.05Billion (that is 50 million) USD compared to its current value of 150BN. Therefore, even if there is some fundamental value to bitcoin it is far, far, away from its current value in the market. Things are even worse because, of course, mastercard makes money from transactions (> 100bp) and shareholders have recourse to that which is not the case for bitcoin holders, and mastercard also has a large number of terminals which is physical tech that might have some value. bitcoin has none. Bitcoin has no natural assets in its purchase space (only other coins). If a small country that I have invested in decides to implement exchange controls and I cannot repatriate (or covert to USD) my money, then what I can do is find some real assets in that country (say a factory or some hotel or some other property or land) and buy them and run that business waiting for the exchange controls to be removed. There is no natural asset that I can buy with bitcoin if bitcoins values vs the USD collapses. Finally, if I copied the bitcoin source code and created a new coin which i will call "DanielCoin" I am free to do so. In this sense bitcoin is ultra-fiat and not even fiat. ____________________________________________________ My concern is that the public, and most tech type crypto purchasers do not understand at all the terms of what they are buying and therefore it is problematic to have an exchange traded ETF extant. There is a remedy to this that I can suggest. It is possible to structure ETF type funds that are short bitcoin. If the ETF were to offer both long and short funds, this would at least enable investors to be clear that this asset can go down as well as up, and also they might think twice before simply going long. It would also be of assistance to the public if the NYSE would be upfront in providing long and short interests in these funds on a real-time basis and require potential investors to peruse this before trading on either side. _____________________________________________________ There will come a time where crypto currencies exist that are truly useful and fulfil the promise of the original Nakamoto white-paper (which is excellent by the way), but we are not there yet. _____________________________________________________ I believe that anyone should be allowed to trade bitcoin or any other coin freely. However, such assets should not be traded lightly, and the general public should be warned regarding the likelihood of this asset to be a Ponzi scheme. As such, having a long fund (without a short fund) being traded under the auspices of NYSE will give investors a false sense of security especially given that there is so much hype in this market and so little understanding even on the part of the so-called experts. _____________________________________________________ Regards. Dr Romanos Daniel.