ELI5
how do the bitcoin etf's actually work?
Discussion
I imagine a lot like this.
Investor gives cash to issuer (BlackRock, fidelity, etc.), issuer gives shares to the investor and the cash to custodian (most use coinbase), custodian buys bitcoin with cash and puts it in issuers account/wallet held by custodian
🤙🏻🔥🫡
this is the most retarded thing i've ever heard
Yes, yes it is. These people could have owned actual bitcoin for 15 years and instead their buying an IOU version regulated by the SEC
can they all be signed up for a psych eval please?
But wait there's more:
Blackrock can just skip the buy bitcoin step and issue as much paper as they want! It isn't legal but laws are for poor people! So the price of bitcoin doesn't change because nobody bought it! That seems to be what happened yesterday since the etfs received 2 billion dollars on day 1 and bitcoin went down.
That seems way too risky for them to actually do that. You really think they didn’t buy the bitcoin?
I dunno. Maybe they already owned it. This has been happening with gold for decades.
The more that IOUs are accepted as bitcoin, the higher the bitcoin supply. The current price is absurdly undervalued, but the price is set by exchanges. FTX had billions in bitcoin liabilities and owned only a couple million. For all we know, the etfs are buying fake bitcoin from coinbase.
Them assigning btc they already owned to the etf makes the most sense to me. Seems like some of the other shenanigans are possible though.
Blackrock has to actually buy the bitcoin. They’re not going to take the risk of illegal fractional reserves with 11 other issuers being competitors. One hint that they are doing that and they’re done for. Unlike FTX, this is strictly regulated by the SEC, and yes, they will enforce it regardless of our skepticism of the SEC.
The sell off right now is due to people getting out of grayscale. People are fleeing gbtc while others are entering the other ETFs, mainly blackrock. Essentially the Bitcoin that gbtc is selling off is being bought right back by blackrock. There’s a chance that the price is going down because obviously, grayscale needs to sell theirs before black rock then buys it so there’s a lag, but there’s dozens of other factors at play as well so no one can say anything with certainty.
None of this truly matters, the price only goes up in the long term.
Just watched RHR from earlier today and apparently the ETFs have 2 days to actually source and buy the bitcoin from ETF purchases. They also are legally obligated to hold 1:1. But we will see. Exchanges are custodians, and exchanges are a primary source for printing paper BTC
Yeah, my concern would be more about coinbase actually having the bitcoin they say are in the ETF accounts. I’m assuming there’s some audit agreement the SEC required to make sure that the bitcoin actually exists and coinbase isn’t lying but I haven’t read all the filings.
that would explain why the price has dipped, but it will come up again if they actually have to try and find bitcoins to satisfy their "obligations"
but you and i both know this is gonna be a clown show
You give daddy money and daddy buys the things he told you he'd buy. In return, daddy writes on a piece of paper saying that he bought you the thing that he said he'd buy.
yeah, i need a new dad asap
Haha this is exactly how my kids buy bitcoin
It doesn't; at least not with real Bitcoin that you own.