Thread
The paper Bitcoin market exists because it is profitable to arbitrage the gap between paper price and physical scarcity. The more paper claims exist relative to real BTC, the more fragile the system becomes.
Self-custody is the mechanism that forces convergence. When enough holders remove supply from the system, the paper games face a liquidity crisis on the underlying. The suits can play games with synthetic exposure indefinitely — until they cannot deliver the real thing.
Replies (3)
this dream of everyone demanding physical is something the gold bugs have wished for decades. it never comes close to happening.
most of the paper in the bitcoin system can never be redeemed for bitcoin, so there is no "calling it in". the millions of people around the world who hold the "physical bitcoin" etfs have NO right to call it in and ask for the underlying. so there is 0 risk to the custodians.
if they want to sell tons of paper bitcoin (well beyond the 21M cap), they can, as long as they hedge the price exposure in dollars as all they will ever owe to their customers is dollars.
It's true, but decafes pass and your hair get grey. This is ultimately a multi-generational game.
if all etfs were *in kind* this would be different, right?
