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Exchange-traded fund (ETF) specialists have dismissed speculations that spot Bitcoin funds will be supported by ‘paper Bitcoin’ or fractional reserves in a recent report. This means that the funds will be completely supported by the actual asset – Bitcoin, which implies that issuers will need to stock up more on the digital currency.
There were rumors alluding to Bitcoin ETFs not being supported by the actual currency, but by ‘paper Bitcoin.’ Deezy founder Danny Kroeger mentioned last week that if Bitcoin ETFs only involved cash inflow and outflow, they would essentially be trading in ‘paper Bitcoin,’ which he remarked could result in constant price suppression. There were other suggestions that indicated the funds could be supported by fractional reserves, a system used by banks where only a fraction of cash deposited with them is held. However, ETF Store President Nate Geraci dismissed these rumors on December 28, stating that spot Bitcoin ETFs will, in fact, hold the underlying Bitcoin asset, and that the total value of the trust will be fully backed by actual Bitcoin.
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