As excitement continued over the potential approval of a spot Bitcoin ETF in January 2024, some analysts expressed concerns, including the issue of backing.
Josef Tetek, a Bitcoin analyst at crypto hardware wallet Trezor, said spot Bitcoin ETFs could potentially create millions of unbacked Bitcoins.
Tetek noted that such ETFs can be described as "paper Bitcoin".
This statement by Tetek triggered the crypto community and many people described it as FUD. Some people have raised the question of how to be sure that the company issuing the ETF is actually holding BTC for its customers. Some crypto observers noted that it would be great if “real on-chain addresses” were published in addition to issuers’ BTC holding reports.
According to David Gerrard, author of Attack of the 50 Foot Blockchain, it is unlikely that ETF managers would “create unsupported BTC equivalents or misrepresent support assets.”
“This is a finance regulated by recognized institutions, and I don't think unbacked ETF shares are a realistic threat,” Gerard told Cointelegraph.
Gerard did not share detailed information about whether customers will be able to track issuers' BTC assets.
Bloomberg ETF analyst Eric Balchunas compared spot Bitcoin ETFs to gold ETFs and said he believes the spot BTC ETF will be very similar.
"Gold ETFs have been around for 20 years and show how many tons of gold are held in State Street gold storage every day. This will be the same way." Balchunas said in an interview with Cointelegraph on December 28
I can't overstate how by the book these asset managers are going to stick to this okay. They just don't want to get into legal trouble. "If they don't hold Bitcoin, they don't want their PR to explode, and even if they don't buy it, they won't sell BTC completely short."
Companies like BlackRock or Grayscale are "completely vulnerable" to Bitcoin volatility, Blachunas said. “Let's say they weren't buying Bitcoin like Sam Bankman-Fried, and these people had BTC shares,” he said and added.
“It is in their interest to acquire Bitcoin.”
The only thing that might not be interesting about spot Bitcoin ETFs is that investors won't be able to buy back Bitcoin instead of cash.
While many industry observers are confident that there is no reason for ETF providers to misrepresent their BTC holdings in their cash generation model, others still think there is a problem.
Tetek told Cointelegraph: "The only way to be sure ETFs won't lead to any paper Bitcoin claims is if the ETF shares are convertible into actual Bitcoin. But that won't be the case, as the proposed ETFs all have cash inflows and outflows, and their holders won't have any cash inflows." They will have to trust without a verification option.” said.
