Does anyone know how, say Blackrock, issued ETFs on illiquid assets can unravel? 1. People lose faith in it's convertibility or issuer 2. It starts to trade at a discount to underlying assets 3. People attempt to convert the ETF back with Blackrock, who can't b/c illiquidity?
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Greshams law says that if you have two currencies with the same govt stated face value, but one has a higher commodity value (i.e. one is made from silver, the other tin), the higher commodity value currency will exit circulation (as people hoard them).
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Afaik, this hasn't happened in ETFs (yet) which is pretty interesting.
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Replying to @Molson_Hart
there was a case with muni etfs a few years ago. There is a loophole.
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Replying to @BarbarianCap
Where you the issuer does not have to exchange the ETF for the underlying assets but instead pay out like it does... synthetically?
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