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Bitcoin ETFs will hold real BTC assets, not “paper”

Exchange-traded fund (ETF) analysts have dispelled rumors that spot Bitcoin funds are backed by “paper Bitcoin” or fractional reserves. Instead, they will be fully backed by the asset itself, meaning issuers will have to stock up.

Rumors regarding support for Bitcoin exchange-traded funds have circulated, adding to the apprehension ahead of the planned January launch.

BTC-backed Bitcoin ETFs

There have been several comments implying that the products will not be backed by the asset but by “paper Bitcoin”. Last week, Deezy founder Danny Kroeger said:

“If Bitcoin ETFs are just “cash-in, cash-out,” it seems like it’s just paper Bitcoin, right? Probably the worst thing that could happen and could lead to endless price declines.

Other comments have suggested they could be backed by fractional reserves. 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 rumors.

“Spot Bitcoin ETFs will *actually* own the underlying bitcoin,” he said before adding: “I’m seeing more comments about ‘paper bitcoin’.”

“The total value of trust will be *fully supported* by actual Bitcoin. Period.”

Read more: How to Prepare for a Bitcoin ETF: A Step-by-Step Approach

James Seyffart, Bitcoin ETF Analyst said there have been “a lot of bad Bitcoin ETF takes.” “People are just misinformed (they’re nice) and way too gullible,” he said before confirming that “Spot Bitcoin ETFs will hold Bitcoin.”

In a separate jobGeraci said that with 14 potential entrants in the race, the next 48 hours “will be crazy” as broadcasters get their ducks in a row.

Current potential issuers include Grayscale ARK, iShares, Bitwise, VanEck, WisdomTree, Invesco, Fidelity, Valkyrie, Global X, Hashdex, Franklin, Pando and 7RCC.

Additionally, December 29 is the Securities and Exchange Commission’s deadline for submitting final filings and applications.

Ark sells its Grayscale holdings

Along the same lines, Eric Balchunas, ETF analyst reported that Ark sold its entire remaining position in Grayscale Bitcoin Trust (GBTC).

He noted that the company used half of the money, or about $100 million, to buy BITO stock. BITO is the first-of-its-kind ProShares Bitcoin Strategy ETF, launched in October 2021.

Assets of Ark BITO. Source: X/@EricBalchunas

“In this way, ARK is now the second largest holder of BITO, although again it is a temporary parking space,” he said before adding that institutions generally use Very liquid ETFs for transitions like this.


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