A Bloomberg analyst clears up a major misconception.

Choosing a “cash-out” redemption model for the spot Bitcoin (BTC) ETF delegated The U.S. Securities and Exchange Commission’s (SEC) report has created several misunderstandings in the industry, and James Seyffart, senior ETF analyst at Bloomberg, has taken the time to correct some of these errors in the X app.

Debunking Major Bitcoin ETF Myths

With many applicants to Bitcoin ETF products now giving in to the SEC’s demands to generate cash, the public appears to believe that adopting this redemption model will result in the funds not holding Bitcoin.

Some people perceive that a Bitcoin ETF will operate as a fractional reserve product upon approval. However, Seyffart clearly emphasized that “a spot Bitcoin ETF will hold Bitcoin.”

In response to this explanation, some Crypto

To answer this, Seyffart pointed to the fact that Osprey Funds has published an address for its OBTC offering. At the same time, he explained that this is not a strategy adopted by many ETF issuers.

I didn’t work today and I’m scrolling through Twitter right now and oh my… There are so many bad things happening #Bitcoin It takes etf. People are simply uninformed (acting nice) and too gullible.

Say it with me:

“Spot Bitcoin ETFs will hold Bitcoin” https://t.co/wZDJCYSfl6

— James Seyff (@JSeyff) December 27, 2023

Another

Cash Generation and Spot Models: The Differences

For cash, it creates redemptions and their counterparts. spot model, BlackRock previously explained Differences in documents presented during meetings with the SEC. The spot model is completed in just a five-step process, starting with a Market Marker (MM) requesting redemption through an Authorized Participant (AP).

The ETF issuer then approves the order and the MM purchases the ETF shares through the listing exchange. As a result, ETF shares are delivered by the MM to the transfer agent. What is noteworthy is that this will happen after the ETF issuer instructs the Bitcoin custodian to release the coins to MMs.

In the case of a cash model, the ETF issuer must first instruct the BTC custodian to take the cash out of cold storage so that MMs can initiate redemptions and then sell it. MMs can then begin trading with the ETF issuer to purchase BTC for USD.

So far, BlackRock and WisdomTree have We adopted a cash generation model.. Grayscale also Added The latest amendment submission noted that “the trust may now accept cash orders”, a concession seen as a positive change to gain approval.

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Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about the practical applications of blockchain technology and innovations that drive general acceptance and global integration of emerging technologies. His desire to educate people about cryptocurrency inspires his contributions to popular blockchain-based media and sites. Benjamin Godfrey loves sports and farming. follow him Twitterlinkedin

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