Paranoid Bitcoin investors have become increasingly convinced that dealings between Coinbase, the biggest crypto exchange in America, and BlackRock, the largest asset manager in the world, may not be entirely on the up and up.

Though a flood of capital into new spot Bitcoin ETFs pushed the price of BTC to a new all-time high in March, just two months after ETFs were approved in the U.S., the price should be much higher today with all those billions flowing into the market, befuddled Bitcoin buyers say.

Coinbase—the U.S.-based cryptocurrency exchange that serves as custodian for most Bitcoin ETFs, including BlackRock—must not actually be buying the Bitcoin requested by these funds, and instead merely issuing “IOUs,” or “paper” Bitcoin, these critics say.

The unsubstantiated rumors echoed throughout social media over the last few months, and eventually became loud enough that Coinbase CEO Brian Armstrong addressed the concerns on X, formerly known as Twitter. “Not sure what this is all about [to be honest],” he said last week. “All ETF mints and burns we process are ultimately settled on-chain.”

Just two days later, however, BlackRock filed an amendment to its ETF registration with the SEC which now requires Coinbase to release Bitcoin much quicker to the asset manager, within 12 hours of notice, when BlackRock customers buy shares of its Bitcoin ETF product. Critics latched onto the update as evidence that their worries were not unfounded.

But it’s all hogwash, says Bloomberg ETF analyst Eric Balchunas. “I’ve been tracking [the ETF] industry for 20 years, and there’s never been a case of this stuff not being with the custodian,” he told Decrypt. “First of all, it’d be illegal.”

The idea that an ETF issuer or its custodian may not actually hold the underlying asset isn’t new. As Balchunas pointed out on X, it’s a worry that some gold investors have shared about gold ETFs for years.

An ETF is a way for investors to gain exposure to an asset, like gold or Bitcoin, without actually holding the asset themselves. With Bitcoin ETFs, for example, investors buy shares in BlackRock’s fund, and BlackRock then buys a corresponding amount of Bitcoin and stores it on Coinbase. There are trade-offs, though, and the added convenience requires an element of trust—and risk.

Skeptical Bitcoiners would rather see on-chain receipts than receive assurances. The idea that Coinbase may be issuing paper Bitcoin to BlackRock dates back to at least May, when the pseudonymous trader “Tyler Durden,” who holds a sizable audience on X, began the charge. “Blackrock can take as much Bitcoin as they want from Coinbase and the transaction is recorded off chain,” he tweeted. The post currently has 1.6 million views.

Earlier this month, music producer and crypto trader MartyParty fanned the flames, claiming that the price of Bitcoin is not moving upwards despite BlackRock “buying all the Bitcoin.” 

“Scam of the century,” he wrote.

Balchunas dismissed the claims as a “conspiracy theory.” 

“This isn’t like FTX, where you just throw up an exchange out of nowhere, and some buffoon is running it from a Bahama penthouse,” he told Decrypt. “[BlackRock] is a serious company which has dozens of lawyers. They’re not gonna jeopardize their hard won reputation, let alone get sued by all the investors,” he said.

Balchunas yesterday confirmed on X that he had spoken with BlackRock to find out more. He said that the asset manager runs “its own blockchain node” and pulls the BTC balances from their wallet addresses to put on Coinbase Prime every night. 

He said the firm can show balances to clients if requested, but would never make them public as they could get hit with spam such as dusting (when crypto users send small quantities of Bitcoin to wallet addresses to track, taint, or de-anonymize them.)

BlackRock declined to respond to Decrypt’s questions, instead pointing to an interview Robbie Mitchnick, the firm’s head of digital assets, gave Bloomberg on Tuesday. When asked about last week’s controversial filing regarding Coinbase, he said it was a “normal course update” and that “nothing of significance has changed.”

A Coinbase spokesperson confirmed to Decrypt that the unsubstantiated rumors being pushed on X were just that and nothing more, adding that regulatory updates were normal. 

BlackRock’s IBIT is the biggest and most successful of the ETFs now trading in the U.S. The fund currently holds 357,732 BTC, according to its website, worth around $22.6 billion.

Bitcoin’s price is now up over 140% over the past year, CoinGecko data shows, with the price surging following the approval of the ETFs. 

“I say you take that as a win,” said Balchunas, referring to Bitcoin’s price. “It could be way worse.”

“I mean, what price would make you happy?”

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