BitMEX Research: If only cash subscriptions and redemptions are allowed, the ETF structure will lose most of its advantages
ChainCatcher message, BitMEX Research posted on platform X stating that the operation of an ETF is as follows:If the ETF is trading at a premium, it is usually due to more buyers than sellers, which incentivizes authorized participants (AP) to purchase the relevant instruments and deliver them to the issuer in exchange for new ETF units. Then, due to the ETF trading at a premium, the AP can sell the new ETF units in the market and make a profit.If the ETF is trading at a discount, the situation is reversed. The AP buys ETF units in the market, provides them to the issuer, and then receives the underlying assets. They then sell the underlying assets to make a profit (since the product is trading at a discount).Most importantly, there should be multiple competing APs. This ensures that the product can handle large capital flows and has a lower tracking error.If only cash creation and redemption are allowed, most of the advantages of the ETF structure will be lost. Currently, only the issuer can buy and sell Bitcoin in the market. Many of the competitions that make the ETF effective will no longer exist.