The U.S. Securities and Exchange Commission (SEC) has recently notified all spot Bitcoin Exchange-Traded Funds (ETFs) applicants. This notification emphasizes that their final prospectuses must exclusively focus on the “Cash Creates” model rather than the “in-kind” model. This directive has led to widespread discussion and negative perceptions regarding the preferred redemption model.
Amidst these developments, a Twitter account claiming to be Satoshi Nakamoto, Bitcoin’s enigmatic creator, posted a memo emphasizing preserving Bitcoin’s original programming integrity. Despite this, some analysts speculate that the release of Bitcoin ETFs could mark the end of Bitcoin as we know it.
However, Bloomberg analyst James Seyffart has dispelled these speculations. In a recent Twitter post, he referred to specific individuals as ‘uninformed’ and ‘gullible’ for their misconceptions about the impact of ETFs on Bitcoin. Seyffart strongly asserts that “Spot Bitcoin ETFs WILL hold Bitcoin.” He reiterated his previous stance that spot Bitcoin ETFs, under the “Cash Creates” model, are not fractional reserve products and will indeed hold actual Bitcoins.
To understand the distinction between the “in-kind” and “Cash Creates” models, let’s look at the processes involved in each:
Major financial firms like WisdomTree and BlackRock have already implemented the cash-create model. Grayscale, aiming for SEC approval, has included this model in their latest amendment file, allowing the Trust to use cash for the cash-create model.
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