Cash Creation vs In-Kind Creation

So what do these two conditions mean respectively? Will they be difficult to meet and will the ETF be approved on 10 January as expected? Let's take a look at the details of the conditions.

The creation of an ETF is the process of selling new ETF shares to investors on behalf of the issuer, and there are two main types of creation: cash creation and physical creation. In cash creation, large institutional investors or Authorised Participants provide cash to the ETF, which is used by the ETF management company to purchase the assets that make up the index tracked by the ETF (i.e. Bitcoin) and issue the corresponding value of ETF shares to investors. This approach is simple, flexible and easy to understand, and it is appropriate when the assets of the ETF are difficult to access directly. Bitcoin, however, does not appear to be difficult to obtain.

In contrast, in-kind creation involves investors directly providing the stocks or other assets that make up the index tracked by the ETF, rather than cash. These assets are directly exchanged for equivalent ETF shares, reducing transaction costs. In the case of a Bitcoin ETF, in-kind creation represents the direct purchase of shares of a spot Bitcoin ETF by an investor using Bitcoin. Both creation methods are designed to flexibly adjust the number of ETF shares in response to market demand and to ensure that their price remains in line with the actual value of the tracking index or portfolio of assets.