The point is that a large fund buys Bitcoin directly from the market, specifically the coins. These coins are counted on the balance sheet, and then people from these funds or small funds or private investors can buy this very Bitcoin, but not the coin itself, rather a proof of ownership of a portion of the coins that are held in the wallets of the large fund.
In simple terms. The fund buys Bitcoin, let's say at 50, 60, or even 100k for its balance, then the buyer approaches the fund and wants to buy Bitcoin officially; the person gives them an amount equivalent to Bitcoin at the current market price. For example, 60k, the fund provides the person with proof of their Bitcoin ownership for that amount. However, the person does not have the Bitcoin; it is not in their wallet, and instead, there is only a bond that proves that the person has these Bitcoins and allows them to exchange this bond for cash at any moment at the current market price.
Now the thought itself.
Mathematics:
The fund buys 10 Bitcoins at 60k and spends 600k$
A person comes and buys an ETF, gives the fund 60k, and receives the ETF (a bond - proof that he bought Bitcoin); let's say all 10 Bitcoins were bought by people and they gave 600k$ to the fund.
The fund has 10 Bitcoins on its balance sheet,
600k debt to ETF holders
And 600k in cash equivalent from these same ETF buyers.
Next, for example, Bitcoin falls to 20k and the fund has:
10 Bitcoins balance.
600k in cash equivalent from the sale of ETF and a total of 200k debt to buyers)
Just for thought and written simply to illustrate the essence; the system is much more complex, but the essence is like this. More details will be in a separate post where I will lay everything out clearly.
Closed club - $
