VanEck Explains What ETFs Bring to Bitcoin

Siamak Masnavi

On 9 November 2018, VanEck's Director of Digital Asset Strategy, Gabor Gurbacs, spoke with Jill Malandrino, the host of TradeTalks, Nasdaq's #1 live social media show, and explained what ETFs bring to Bitcoin (and the crypto space in general).

In this interview, Gurbacs, whose firm has made a Bitcoin ETF proposal (VanEck SolidX Bitcoin Trust) to the U.S. Securities and Exchange Commission (SEC), started by saying that when they think about digital assets at VanEck, they think about "integrating digital assets into the established capital markets", and that "one of the most established liquid and transparent vehicles are ETFs," and so they were "trying to find a way in which to use that vehicle to enable investors to benefit from it." 

He then listed the benefits that ETFs bring to Bitcoin:

  • Liquidity: "the liquidity that is brought through the authorized participant system, in general the ETF ecosystem"
  • Price Discovery: "ETF are often price-based on established and regulated price series, like what we do at MVIS over in Frankfurt."
  • Established Capital Market Structure
  • Compliance with global regulations

"Today, millions of Americans sort of invest in Bitcoin. We just want to provide a better and more secure way to enable Americans to own Bitcoin... From the feedback we are getting, it is fairly clear to me that America wants a Bitcoin ETF."

Malandrino then asked Gurbacs why it has been so difficult to get a Bitcoin ETF proposal approved by the SEC. He replied:

"I think it's because the market is fairly new. So, the regulators want a walk before we run. And so, we've been working for a while now on providing an explanation for why our pricing methodologies are appropriate, why there are already good enough custody solutions like Fidelity coming into the space and providing custody solutions is a big deal, and from the investment side, large endowments like Yale... are already in the space, and they've expressed a desire to invest in a way they're used to investing in equities and commodities."

He then went on to say that although his firm is still waiting for a decision from the SEC, he remained positive:

"I'm positive. I actually think that digital assets have the potential in the next two decades to become a $10 trillion industry... I think the change we're going to see in the digital asset space is going to be very rapid. For ETFs to go from 0 to $3.5 trillion, it took about 20 years. I think for digital assets to get to that level, it will take 10 years, and to get to $10 trillion, it's going to take about 20 years."

 

Featured Image Courtesy of VanEck

Decentralized Crypto Exchange Bisq Exploited for $250,000 in BTC and XMR

Decentralized cryptocurrency exchange Bisq, which allows for peer-to-peer trading, has halted trading on Tuesday after uncovering a “critical security vulnerability.”  The vulnerability led to the loss of at least $250,000 in BTC and XMR.

At the time the exchange didn’t go into the situation, but merely advised users to not make any transactions. It used an alert key functionality to halt trading, but as it’s a decentralized exchange it can be bypassed by users.

About 18 hours after initially halting trading, Bisq revealed it was exploited by a hacker who managed to steal “approximately 3 BTC and 4000 XMR” from seven different users on the platform. The only affected market was the XMR/BTC one, and affected traders occurred over the past 12 days, Bisq revealed.

The vulnerability was created after an upgrade meant to help further decentralized the platform, by removing arbitrators with a third key in the multisig escrow used when trading funds. The arbitrators were replaced with mediators and arbitrators with no keys in the escrow, and to make up for the removal of a trusted third party, Bisq moved BTC trade funds to a so-called “donation address” after a time limit in order to solve abandoned trades.

Per the exchange, a flaw in the way the traders were carried out allowed a hacker to change the address the funds would be sent to for his own, netting around $250,000 in crypto.

This donation address is set by the Bisq DAO and approved by DAO stakeholders. Bisq software did not verify that the payout address for trades was actually the Bisq donation address set by the DAO before signing and sending the time-locked payout TX to the trade counterparty.

On Bisq’s forums, users pointed to a bitcoin address the funds moved through, which has seen a total of 19.6 BTC ($143,000) flow through it. Blockchain data shows the funds have since then hopped through various addresses, likely to conceal their origin and throw off sleuths.

Bisq’s DAO, the exchange’s funding mechanism, is reportedly going to create a proposal to repay the seven known victims of the hack using future trading revenues.

Featured image via Pixabay.