Crypto glossary
Authorized participant
An authorized participant (AP) is a large firm allowed to create and redeem ETF shares directly with the issuer, keeping the fund's price close to its value.
ETF shares trade on the exchange between investors, but only authorized participants, usually big banks and market makers, deal with the fund itself. They deliver cash or the underlying asset to create new shares in large blocks, and hand shares back to redeem them. This primary-market channel is what lets an ETF grow or shrink with demand.
The mechanism keeps prices honest through arbitrage: if the ETF trades above the value of its bitcoin, APs create shares and sell them; if below, they buy shares and redeem. US spot bitcoin ETFs launched in 2024 with cash-only creations, where the issuer buys the coins; in 2025 the SEC approved in-kind creation, letting APs deliver bitcoin directly.
APs are not obliged to act, and in stressed markets they may step back, widening premiums or discounts. Crypto ETFs rely on a small group of APs and on custodians, so operational problems or regulatory limits on banks holding crypto can affect how smoothly the arbitrage works.
Example
When a bitcoin ETF trades 0.5% above its net asset value, an authorized participant creates 50,000 new shares by delivering BTC to the custodian and sells them on the exchange.