Bitcoin Players – You’ll Soon Have Your Own Index And ETF!

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The irrepressible Winklevoss twins filed an amendment to the S-1 for their bitcoin ETF (proposed last year) that will derive its value from an index called, rather improbably, the Winkdex.

The Winklevoss Bitcoin Trust

This is how the ETF, the first to be publicly traded on public stock exchanges for Bitcoins, will work as per the filing:

“The Trust values its bitcoins by reference to the Winkdex spot price. The Winkdex spot price is the value of Winkdex calculated at 4:00 p.m. New York time on each Evaluation Day. Math-Based Asset Index, LLC (“Index Provider”) developed, calculates and publishes Winkdex on a continuous basis using a patent-pending mathematical formula developed for such purpose. The formula provides a volume-weighted, exponential moving average market price by blending trading data from the largest Bitcoin Exchanges by volume on a list of Sponsor-approved Bitcoin Exchanges. Bitcoin Exchange criteria for inclusion as a Winkdex constituent include (i) trading denominated in US Dollar, (ii) availability of trading data, (iii) volume criteria and (iv) lack of recent trading halts. The Index Provider maintains a monitoring system that tests for these criteria on an ongoing basis.”

Winkdex – the Bitcoin index

Here is a screenshot of the Winkdex taken from its website:

The chart was generated using the ‘Max’ data period option, and provides Bitcoin pricing information from the earliest date for which data is presumably available.

The price will be computed based on that prevailing at any three qualified Bitcoin exchanges that have the highest volume of trading in the previous two-hour time span.

The index will rely on as many as seven exchanges for its data as can be seen from the tabs on the webpage. The price being reflected by ‘mtgoxUSD’ is an unrealistic $152.02 because it is currently not ‘qualified.’

“As of February 7, 2014, Mt.Gox placed a “pause on all [BTC] withdrawal requests” in addition to a continued “back-log of [USD] withdrawals”. As a result, it is no longer a qualified exchange for the Winkdex calculation,” explains the Winkdex website.

The Twins will benefit from the ETF and Index too

According to Gigaom, the Winklevoss twins have a personal hoard of Bitcoins worth tens of millions of dollars; it makes sense for them to bring the Bitcoin crypto-currency out of the closet and into the financial mainstream – what could be better than an ETF and an index styled after the S&P 500?

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