Holding Bitcoin in the ‘best interest’ of spot ETF issuers – Analyst
In the year Amidst the continued hype of the spot Bitcoin (BTC) exchange-traded fund (ETF) approval in January 2024, some industry analysts have expressed concern about some ETF-related issues, including the issue of support.
Joseph Tetek, a bitcoin analyst at hardware crypto wallet firm Trezor, said in December 2023 that the space for bitcoin ETFs could take people away from self-protection and create “millions of unsupported bitcoins.”
Tětek said that such ETFs would probably end up in one of the worst cases, so-called “paper bitcoins”.
Tetec's statement sparked significant backlash from the community, with many considering the claims as FUD. In contrast, others have raised the question of how an ETF issuer can ensure its clients hold Bitcoin. Some crypto observers have noted that it would be great to see “on-chain addresses” published in addition to the issuers' BTC holdings reports.
Yes so without printing actual onchain addresses in any fund, they will capture what they actually show you on the screen.
I can't verify what they say they contain.
— Sunny Po (@sunny051488) December 19, 2023
According to the book's author David Gerrard, it is unlikely that ETF managers will “create unbacked BTC equivalents or lose their backing assets.”
“This is a well-managed finance, and I don't believe that unbacked ETF shares are a real risk model,” Gerard told Cointelegraph. Gerard did not elaborate on whether clients could track BTC holdings with issuers.
Bloomberg ETF analyst Eric Balchunas compared a position BTC ETF to a gold ETF, saying the position BTC ETF would be very similar.
“Gold ETFs are '33 Act donor ETFs. It's been 20 years now. And every day, State Street keeps track of how many tons of gold the custodian holds. This will be the same thing,” Balchunas said in an interview with Cointelegraph on December 28. The analyst said:
“I can't explain how these asset managers are on the books, okay? Not only do they not want legal trouble, they don't want PR to blow up if they don't own bitcoin, and they don't want to short bitcoin entirely if they don't buy it.
Balchunas said that companies like Blackrock or Grayscale are “completely vulnerable” to the volatility of Bitcoin. “Let's say they don't buy bitcoins Sam Bankman-Fried style. And all these people had a stake in Bitcoin,” the analyst said.
“It's better for them to own bitcoins, not just in demand, not just a big record. […] They want to provide the access point and make the expense ratio, whatever it is, 60 basis points.
The only thing that may not be interesting about the space is that Bitcoin ETFs – in their current form of money-making – the investor cannot get back bitcoins in exchange for cash.
“But if you're the type of person who wants bitcoin back, buy it directly,” Balchunas said, referring to the autonomy believed to be central to bitcoin's original vision by anonymous inventor Satoshi Nakamoto. .
But anyone who owns a mutual fund or ETF and has total assets like $30 trillion doesn't want to touch the core, a Bloomberg ETF analyst emphasized.
Although many industry observers are convinced that there is no reason for ETF providers to misplace their BTC holdings in a cash-generating model, others are convinced that there is still a problem.
“The only way to be sure that ETFs don't lead to any paper Bitcoin claims is if the ETF shares are redeemable for actual Bitcoin,” TiTech told Cointelegraph.
“But since the proposed ETFs are all cash-in, cash-out, that's not going to happen, and holders have to believe it with no option to prove it,” he added.
Additional reporting by Ana Paula Pereira.
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