I don't know if the ETFs have paper bitcoin. None of us do. It's possible, but I doubt it. There is little reason for them to do this at this point. They are making money on fees in some cases and in others they are just trying to grab market share(investors).

We now know that FTX was a paper tiger though. Big difference between the two. Regulation. The regulators would love to hurt bitcoin and I suspect they would nail any ETF custodian trying to do this. Not out of love for bitcoin or bitcoiners but because it would be bad for bitcoin perception in the minds of normies.

I don't think paper bitcoin is the risk with ETFs. The risk is state control over these ETF. Closing them or taking the coins. So don't think I am saying the ETFs are a good option. They have the same risks as stocks and other tradfi assets. They are old tools for the old system.

IMO it is far more likely exchanges are creating paper bitcoin. They have note to gain and less to lose.

And for those people on SN with problems with complex topics. I don't trust the state or Blackrock. This is just my view of the game theory and tradeoffs.