New Bitcoin ETF Challenges Winklevoss Bitcoin Trust by Offering Insurance

 A new Bitcoin ETF called SolidX Bitcoin Trust has filed its S-1, an SEC filing used by establishments to register public securities, to challenge the Winklevoss Bitcoin Trust. Since the launch of Grayscale Investment’s Bitcoin  Investment Trust in 2015, publicly tradable Bitcoin shares and Bitcoin  ETFs have become increasingly popular amongst conventional investors  across the world. However, GBTC and other forms of public Bitcoin investment  tools have been criticized for their unproportionally high premium  rates, that often displayed a range of 10% to 70% in rate difference  compared to the actual price of Bitcoin. On May 10, the Bitcoin Investment Trust was traded 60% higher  than Bitcoin, exhibiting an increase in demand from investors that  didn’t want to deal with buying and storing the digital currency. 

Protecting shareholders against loss or theft

The premium rates of publicly tradable Bitcoin investment  tools have been substantially higher than the actual price of Bitcoin  because investors didn’t have to deal with the challenge of keeping  Bitcoin safe. Although there are many technologies like the  multi-signature technology and cold wallet, the entire concept of  storing a digital currency was difficult for traditional investors. Similar to other Bitcoin ETFs in existence, SolidX Bitcoin  Trust announced that it has secured insurance for its Bitcoin storage  and that the Trust will handle all excess vault risk, offering  protection for shareholders against loss or theft of their Bitcoin. “The purpose of the insurance is to protect shareholders against loss or theft of the Trust’s bitcoin,” read the S-1 filing of SolidX.  “The insurance will cover loss of bitcoin by, among other things,  theft, destruction, bitcoin in transit, computer fraud (i.e., hacking  attack) and other loss of the private keys that are necessary to access  the bitcoin held by the Trust,” it continued. While the choice to invest in a public Bitcoin ETF rather  than the digital currency itself is debatable, for traditional  investors, it could be an efficient choice even with its premium price  because of the extra security and insurance it provides. That is, if the Bitcoin ETF or the provider of the public Bitcoin investment tool provides full insurance. 

Security issues - can you trust Winklevoss Trust?

The Winklevoss twins’ Bitcoin Trust however, does not offer  any kind of insurance to its investors. The Trust doesn’t insure its  bitcoin and shareholders must invest with the risk of theft and loss of  Bitcoin. “The Trust will not insure its bitcoin. … Therefore,  Shareholders cannot be assured that the Custodian will maintain adequate  insurance or any insurance with respect to the bitcoin held by the  Custodian on behalf of the Trust,” said the twins.  

Essentially, the  Winklevoss twins’ “public” Bitcoin investment tool, which most likely  will be traded at a higher price compared to Bitcoin, loses its merit  because investors will have to deal with the same security issues they  would deal with when they buy and sell bitcoin at a Bitcoin exchange.  

from : 

http://cointelegraph.com/news/new-bitcoin-etf-challenges-winklevoss-bitcoin-trust-by-offering-insurance