Cameron and Tyler Winklevoss, the twins best known for their legal battles with Facebook Inc. founder Mark Zuckerberg, want to bring bitcoin investing to the public.
The pair, through their eponymous capital management company, plan to launch an exchange-traded
trust that invests in the digital currency, according to a filing with the Securities and Exchange Commission.
The aptly named Winklevoss Bitcoin Trust is “designed for investors seeking a cost-effective and convenient means to gain exposure to Bitcoins with minimal credit risk,” according to the filing. The
trust seeks to raise approximately $20 million in its initial public offering, which would make each $20 share worth about 0.2 bitcoins, according to the filing.
Bitcoins took off in popularity earlier this year when they surged from less than $20 a bitcoin to a high of $266 a bitcoin in April. Bitcoins were trading at a weighted average of $91 on Monday night, according to bitcoin exchange service Mt. Gox. Around the time of its peak,
the Winklevoss twins came forward as the first bitcoin moguls, claiming to own around $11 million worth of bitcoins in April –
The trust will track the “the Blended Bitcoin Price” which is based on “the daily average of the high and low trading prices on various Bitcoin Exchanges in the Bitcoin Exchange Market chosen by the Sponsor.”
Bitcoins, which were created by a hacker, or hackers, named Satoshi Nakamoto, have been on something of a roller coaster ride this year. Before their more than 1,000% run up from January to April, they had previously been best known as the preferred payment method for buying illegal drugs online in 2011.
They came roaring back into the spotlight following the drama in Cyprus that put a spotlight on currencies manipulated by central banks. That crisis pushed some in Europe to look for alternative currencies.
The alternative came in the form of bitcoins, a digital-math based currency, that relies on a decentralized network free from governmental authorities or financial institutions, according to the filing. “The value of Bitcoins is determined by the supply of and demand for Bitcoins in the Bitcoin Exchange Market, as well as the number of merchants that accept them,” it said.
Investing in bitcoins does not come without risk, however. The regulatory status of the digital currency, for instance, has so far been undefined.
“The Sponsor believes that, on balance, the important features of Bitcoins and other Digital Math-Based Assets are those that are characteristics of commodities and therefore has referred to and discussed these assets as such. It is not known whether US or foreign regulators will share this view, adopt a single, different view or espouse a variety of differing views,” the trust wrote in the filing.
Another risk –— and one the Winklevoss twins are no doubt keenly aware of — is there's nothing stopping any one else from creating a competing product. “The Trust will compete with direct investments in Bitcoins and other potential financial vehicles, including securities backed by or linked to Bitcoins and DMBA ETPs similar to the Trust,” the Trust wrote.
The Winklevoss twins, of course, claimed Mr. Zuckerberg stole the idea for Facebook from them. While the three were students at Harvard they worked together to create the social network ConnectU. After Mr. Zuckerberger created Facebook, the twins sued, claiming he'd stolen their idea. The twins settled for $20 million in cash and a boatload of Facebook shares.
The question now: Will the Winklevoss Bitcoin Trust be the Facebook or the ConnectU of bitcoin investing?
