SecondMarket Establishes New Bitcoin Trust for Accredited Investors
SecondMarket, the online platform where private company stock can be traded, has created a private trust investing exclusively in the digital currency Bitcoin.
The newly minted Bitcoin Investment Trust will make it possible for investors to buy a stake in the Bitcoin market without directly purchasing the currency themselves. The value of the trust will derive solely from the price of Bitcoin, SecondMarket explained. The trust is open only to accredited investors, and the minimum investment is $25,000. For individuals, being an accredited investor means having a personal net worth or assets under management of $1 million or more, not counting the value of one's home.
SecondMarket itself has sunk $2 million into the Bitcoin Investment Trust. Perhaps to sway prospective investors, the trading platform also hosts a "Bitcoin education center" to provide up-to-date news and analysis as well as basic information about the cryptocurrency.
Bitcoin is a digital currency that exists without a central bank or issuing agency. Bitcoins are produced when powerful computers perform complex mathematical calculations, in a process known as mining.
Every four years, the number of bitcoins produced reduces by half, until a total of 21 million bitcoins have been produced, which will occur sometime around the year 2140. Because scarcity is baked into the system, demand alone determines the value of Bitcoin. There are about 11.7 million bitcoins in existence now, with a total market value of about $1.5 billion at current exchange rates.
SecondMarket's open-ended trust may compete with the Winklevoss Bitcoin Trust. The brothers best known for feuding with Mark Zuckerberg over ownership of Facebook registered their trust with the Securities and Exchange Commission in July, seeking to take it public as soon as possible.
If approved, the Winklevoss Bitcoin Trust will be listed on a public stock exchange, its shares available to everyone. Only accredited investors can buy into the Bitcoin Investment Trust.
Bitcoin has received increasing scrutiny in recent months. Last month, representatives of the Bitcoin Foundation met with federal regulators on Capitol Hill, including members of the Federal Bureau of Investigation, the Internal Revenue Service and the Justice Department, to brief them on the currency and urge them not to squash innovation in the digital currency space.
Brian Patrick Eha is a freelance journalist and former assistant editor at Entrepreneur.com. He is writing a book about the global phenomenon of Bitcoin for Portfolio, an imprint of Penguin Random House. It will be published in 2015.