In the realm of cryptocurrency investment, the much-awaited Spot Bitcoin Exchange-Traded Funds (ETFs) have been the talk of the town. However, amidst the buzz, misconceptions have clouded the understanding of crucial aspects like Cash Creates, prompting Bloomberg’s Senior ETF Analyst, James Seyffart, to dispel these misconceptions.

One prevailing misconception is the belief that the adoption of a Cash Create redemption model, mandated by the United States Securities and Exchange Commission (SEC), implies that the ETFs won’t hold actual Bitcoin. Seyffart made it unequivocally clear: “Spot Bitcoin ETFs WILL hold Bitcoin.”

This clarification came in response to public confusion, with some speculating that approved Bitcoin ETFs might function as fractional reserve products. Addressing concerns, Seyffart highlighted the Osprey Funds’ decision to publish addresses for its OBTC offering, although this practice isn’t widely adopted by ETF issuers.

During discussions on the X app, Seyffart fielded inquiries about whether ETF issuers would disclose on-chain addresses for public scrutiny of the cash-create model. He noted Osprey Funds’ initiative but emphasized its rarity among issuers.

However, some individuals sought a simplified guide explaining the intricacies of Bitcoin ETFs, which Seyffart amusingly acknowledged with a chuckle.

One crucial distinction Seyffart clarified was the difference between the cash create redemption model and its counterpart, the in-kind model. BlackRock elucidated this during a meeting with the SEC, outlining the five-step process of the in-kind model that involves Market Makers, Authorized Participants, and ETF issuers.

Understanding these redemption models is vital. While the cash create model is mandated by the SEC for Spot Bitcoin ETFs, it’s crucial to note that this doesn’t mean the absence of Bitcoin holdings. Conversely, the in-kind model, with its five-step process, offers an alternative redemption pathway for ETFs.

Addressing public inquiries regarding transparency, some questioned if ETF issuers would publish on-chain addresses to verify the cash-create model. While Osprey Funds had shared addresses for its OBTC offering, Seyffart explained this wasn’t a widespread strategy among ETF issuers.

However, understanding the redemption methods is crucial. The distinction between cash create and the in-kind model, as elucidated by BlackRock in a meeting with the SEC, is pivotal. The in-kind model operates through a concise 5-step process initiated by a Market Maker (MM) and executed via an Authorized Participant (AP).

ETF issuers’ adherence to the SEC’s cash create requirement doesn’t diminish the fund’s holding of Bitcoin. Instead, it defines the redemption mechanism, offering a different approach than the in-kind model.

For those delving into the Bitcoin ETF concept, seeking a comprehensive guide, Seyffart’s response to a request for a book on the topic was met with humor. While a concise guide may not exist, understanding the fundamentals remains crucial for investors and enthusiasts alike.

The intricacies of these ETFs extend beyond mere investments. They embody a fusion of regulatory compliance, technological innovation, and investor trust. As the crypto market evolves, grasping these nuances becomes pivotal for informed decisions.

For a deeper dive into the complexities of Bitcoin ETFs, it’s crucial to comprehend the role of SEC mandates, the mechanisms behind redemption models, and the core principle: spot Bitcoin ETFs do indeed hold Bitcoin.