Not sure I follow. Why would they get rekt? Can you give me the gist of it?
Discussion
The latest request by the SEC to make the ETFs a “cash creation” would make the ETF hold cash instead of the actual bitcoin for the customer and if the don’t have to show proof of reserves, they can suppress the price (ex. Blackrock holds the cash and buys/holds at Coinbase). Could be insolvent if bitcoin rips and they don’t have enough bitcoin for customer withdrawals (if allowed).
Yuck. 🤢
Mainly this 👆 I didn't know about the "cash holding" though.
But at the end, it's a custodian, and they might not store the "bought" amount of btc, and when people want to take out, they won't be able to service it. I guess you won't be able to self-custody from this any way. You will only be able to sell your asset, but if it turns out they have less btc, the etf price will drop, and you lose.
Not an expert on this but I've seen a couple of explanations of what a "Cash Create" means, and this is the sort of thing I see:
My understanding is the existing Spot ETFs in Canada (which we've had a couple of years now) use Cash Creates and they've always tracked the BTC price well.