For example:

The user bought a spot ETF worth one #Bitcoin at $IBIT. At this time, the AP needs to hedge the price first (more on this later), and then "mobilize" a new BTC, and the source of this BTC can be :

1. Buy from exchange

2. Buy from over-the-counter (OTC)

3. BTC in reserves

4. Other channels

The BTC raised by AP will be given to custodians, such as Coinbase, for custody. So it can be seen that as an AP, you only need to ensure that each BTC corresponds to the number of ETFs purchased by the user, and where it comes from is not very important.

For custodians, they only need to store the corresponding value of BTC within the T+1 period, so the role of AP is crucial here.

To put it in human terms, for example, I am an AP, I hold 50,000 BTC, and the average price is 50,000 US dollars. Then when a user buys a spot ETF at 70,000 US dollars, I can not buy it from the market, but put my Inventory BTC is provided to the custodian.

Then my profit is US$20,000. Unless I don’t have BTC in hand, or I don’t want to sell the BTC in my hand, I will obtain BTC from the market or third-party channels and then transfer it to custody within T+1. Fang hands.

Therefore, no matter how large the purchase volume of BTC spot ETF is, it may not have an impact on the spot market, because the BTC in AP’s hands may not come from the spot market, and OTC is also a good channel. After all, there is T+1 time to calm down. Faced with this, some APs can even obtain BTC from users through lending, all for the sake of profit.

Next, let me ask a more interesting question. This is in the case of buying. So let me ask my friends, if it is selling, will AP definitely sell the BTC in its hand?

The answer is no. After all, the current spot ETF rules are gold standard transactions. AP only needs to mobilize enough funds, and does not need to sell BTC.

So it should be clear that the buyers of spot ETFs are not necessarily users and institutions, but APs.

Therefore, the CME hedging mentioned by the painter and other friends is basically what AP does for arbitrage, and has no essential relationship with the direct purchase of spot ETFs. What more friends need to pay attention to is the daily net inflow, because this It means that when the user is unwilling to sell, the AP cannot be sold.