What happens if an ETF collects 10 billion and buy only Bitcoin for 1 billion
- Like in fractional reserve
- Assumption that everyone is not going to redeem the ETF
48 sats \ 0 replies \ @2d 25 Jan freebie
not sure if that could work like that (who knows) but agreed, they would get caught
my understanding is the flow goes: etf buyer -> broker -> AP -> sponsor -> custodian
if the ETF (sponsor) collects net 10B then that is coming from the AP as the middleman (they put the cash in with the sponsor to create the shares, net a fee). sponsor then uses that cash to buy btc and store at a custodian. if the sponsor only buys 1B worth, the AP would know something is up (ignoring liquidity / supply issues) - I'd expect they already have an idea of what the $$/share and NAV should be pre/post the trade getting filled and are expecting to move 10B of new shares back to the broker.
if that's wrong someone please correct me, would love to understand it better
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0 sats \ 0 replies \ @Rex 25 Jan
Probably the same as FTX.
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0 sats \ 0 replies \ @OriginalSize 25 Jan
Eventually they will get caught especially as leverage comes into play on top of ETFs.
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