ChatGPT4 gives this answer to your question:
Your understanding of the dynamics of an ETF (Exchange-Traded Fund) investing in a cryptocurrency like Bitcoin (where the denomination is in satoshis, or "sats") seems to be on the right track. Let's break down your example and address your big question.
In your scenario, you're considering an ETF where the underlying asset is measured in satoshis, and the value of these assets fluctuates with the price of Bitcoin. Here's how it works:
1. **Initial Scenario**:
- 100 shares in the ETF, with a total of 100,000 sats.
- The price of each sat is $2, so the total Net Asset Value (NAV) of the ETF is $200,000.
- Each share is thus worth 1,000 sats.
2. **Price Increase to $4/sat**:
- NAV increases to $400,000 (100,000 sats at $4 each).
- You buy 10 shares at this new valuation.
- The fund receives $40,000 and buys 10,000 new sats at $4/sat.
- Total shares: 110, Total sats: 110,000.
- Each share still represents approximately 1,000 sats.
3. **Price Increase to $5/sat**:
- Market price per sat increases to $5.
- $40,000 now buys fewer sats (8,000 sats).
- Total shares: 110, Total sats: 108,000.
- Each share now represents about 982 sats.
4. **Price Decrease to $2/sat**:
- Market price per sat decreases to $2.
- $40,000 buys more sats (20,000 sats).
- Total shares: 110, Total sats: 120,000.
- Each share now represents about 1,091 sats.
In this scenario, the value per share in terms of sats changes based on the market value of Bitcoin at the time of each transaction. The ETF does not maintain a fixed number of sats per share; instead, the number of sats represented by each share fluctuates based on the fund's total satoshi holdings and the number of outstanding shares.
Regarding your big question: **Is the price per share sold updated for the sats they acquire?**
- In most ETFs, the price per share that investors buy or sell at is based on the NAV per share, which is calculated at the end of each trading day. This NAV reflects the current market value of the underlying assets (in your case, sats) divided by the total number of shares.
- When new shares are issued (like when you bought 10 shares), the ETF uses the money to buy more of the underlying asset at the current market rate. This is then reflected in the NAV and, consequently, in the value of each share.
So, in essence, the price per share is indeed updated to reflect the current value of the assets the ETF holds, which in your scenario, is the number of sats and their current market value.
