Exchange-traded fund (ETF) analysts have dispelled rumors that spot Bitcoin funds will be backed by ‘paper Bitcoin’ or fractional reserves. Instead, they will be fully backed by the asset itself, which means issuers will need to load up.
Rumors regarding the backing of Bitcoin exchange-traded funds have been circulating, adding to the apprehension before the projected January launch .
Bitcoin ETFs Backed by BTC
There have been several comments implying that the products will not be backed by the asset but ‘paper Bitcoin.’ Last week, Deezy founder Danny Kroeger said :
“If the Bitcoin ETFs are just “cash in, cash out,” it seems like they are just paper Bitcoin no? Probably the worst thing that could happen and may result in endless price suppression.”
Other comments have suggested that they could be fractional reserve backed. Fractional reserves are the systems that banks use by holding only a fraction of the cash deposited with them.
However, on December 28, ETF Store President Nate Geraci refuted the rumors.
“Spot bitcoin ETFs will *actually hold* the underlying bitcoin,” he said before adding, “I’m seeing more “paper bitcoin” comments out there.”
“The total value of the trust will be *fully backed* by actual Bitcoin. Period.”
Bitcoin ETF analyst James Seyffart said there were “a lot of bad Bitcoin ETF takes.” “People are simply uninformed (being nice) and way too gullible,” he said before confirming “Spot Bitcoin ETFs WILL hold Bitcoin.”
In a separate post , Geraci said that with 14 prospective entrants in the race, the next 48 hours “will be wild” as issuers get their ducks in a row.
The current prospective issuers are Grayscale ARK, iShares, Bitwise, VanEck, WisdomTree, Invesco, Fidelity, Valkyrie, Global X, Hashdex, Franklin, Pando, and 7RCC.
Furthermore, December 29 is the final deadline the Securities and Exchange Commission has set for submitting final filings and applications.
Ark Sells Grayscale Trust Holdings
In related news, fellow ETF analyst Eric Balchunas reported that Ark has sold its entire remaining Grayscale Bitcoin Trust (GBTC) position.
He noted that the firm has used half the money, around $100 million, to buy BITO shares. BITO is the ProShares Bitcoin Strategy ETF, the first of its kind, launched in October 2021.
“Just like that, ARK is now the second biggest holder of BITO, although again this is a temporary parking spot,” he said before adding that institutions generally use highly liquidity ETFs for transitions like this.
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