By Erin Griffith

On September 25, 2013

Barry Silbert has been obsessed with Bitcoin. Obsessed. His priorities in life, he says, are ordered as such: his wife, his company, and Bitcoin. The crypo-currency is the first thing he has seen like it since the Internet.

Silbert has invested plenty of his own money into actual Bitcoins, which hes purchased on Bitcoin exchange Mt. Gox. Hes also invested in 10 Bitcoin-related startups (and one fund ) through his aptly named fund, The Bitcoin Opportunity Fund.

As of today, hes taken it a step further, merging his second and third priorities. Today, he announced that his company, SecondMarket. which allows investors to buy and sell shares in private companies, will now allow investors to buy and sell shares in a Bitcoin trust.

Bitcoin Investment Trust launches as an open-ended private trust that invests exclusively in Bitcoin. The private fund is currently raising capital, and SecondMarket has kicked things off with a $2 million allocation. The Trust will operate as a subsidiary of SecondMarket.

The fund will allow people to invest in Bitcoin the same way theyd invest in gold or silver. In fact, Silbert said, the trust mimics the structure of Spider Gold Trust. the exchange traded fund (ETF) which invests exclusively in gold. These commodities trusts were the catalyst to making gold an investable asset class of its own, bringing gold investing to the masses.

Bitcoin Investment Trust will aim to do the same thing for Bitcoin as an asset class. (To be fair, on a much smaller scale the entire value of all Bitcoin in the world $1.5 billion.) As it is, institutions dont quite know how to invest in Bitcoin. The buying and selling of it is murky, it is unregulated, and institutions are unclear how to account for it on a balance sheet. But large investment houses and hedge funds are interested, Silbert says. Theyre coming up with a Bitcoin strategy, he says. The conversation has changed.

Silbert notes that the conversation in Washington around Bitcoin has also changed as well. The IRS wants to see Bitcoin fitting into a regulatory system, and senators are no longer talking about shutting it down. If the US shuts it down, itll go to China or Russia, he says, which regulators dont necessarily want.

SecondMarkets Bitcoin trust isnt original the infamous Winklevoss twins launched  plans for a Bitcoin trust earlier this year. The announcement of Winklevoss Bitcoin Trust was met with plenty of skepticism from observers, who said that the volatility and the theoretical value of the currency made it extremely risky.

The difference between the Winklevoss and SecondMarkets is that only accredited investors can invest in the latter. This fits in with SecondMarkets strategy of selling shares in privately-held companies, since, as of now, only accredited investors can do that, too. The company has actually started offering its investor verification tools to startups now that the JOBS act requires startups vet their investors to ensure they are sophisticated. (That is, if the startups choose to engage in general solicitation, but I digress.)

We believe that the risk profile of Bitcoin is not appropriate for retail investors, Mark Murphy SecondMarkets EVP of Communications & Public Affairs writes in an email.  We’re obviously excited about the potential upside of Bitcoin, but there’s also the distinct possibility that the value of Bitcoin will go down to zero. Ergo, the companys trust is limited to sophisticated investors.

The Winklevoss vehicle, on the other hand, is seeking approval to become an ETF, meaning it will be publicly traded and anyone would be able to buy a share in the trust. SecondMarket is skeptical that the SEC will approve a publicly-traded ETF for bitcoin anytime soon, Murphy notes.

SecondMarkets trust is available to investors starting tomorrow. The company has more than 100 relationships with sources from which to acquire Bitcoin. That includes merchants who accept Bitcoin, early adopters sitting on large stockpiles of it, and current miners who are doing energy arbitrage by setting up server farms to mine for Bitcoin in parts of the world with the lowest energy costs. The company does rigorous diligence on its sellers to ensure its not acquiring drug money, Im told. Investors in the trust will be able to sell their shares via auction; the value of the trust will be calculated and published daily.

Bitcoin was first adopted by hackers, but now techies, libertarians and venture capital-types have gotten on board as well. The next logical group is investors, Silbert says. When they decide to invest, SecondMarket will welcome their cash.

[Image courtesy zcopley ]