The ETFs have been suspect from the start. It is no surprise that the Bitcoin ETF is being used as a source of funding for the government.
This is how it works:
A customer puts money into their brokerage account and buys a bitcoin ETF.
The broker buys the ETF from the issuer and the customer can see it on their statement.
The customer doesn’t really own the ETF, the just have the beneficial interest in the change in price (they own a derivative contract their brokerage)
Another customer wants to buy a bitcoin ETF and they put money with the brokerage to pay for it.
The brokerage doesn’t need to buy another one from the issuer because they can borrow the one that own on behalf of the customer and sell it to the next customer.
The brokerage has sold 2 ETFs and they have only paid for one. They put the balance of the money in government bonds and enjoy the interest that they earn.
The government does not regulate this type of thing out of existence because this is just one of the operations that creates demand for their debt that enables them to spend more than they earn and to win votes from people that are stupid enough to thing that our economy is sustainable.
