Will a Bitcoin ETF allow ad hoc creation of btc?
Yes it will, but not directly.
There are different measures of the money supply:
Monetary base: amount of money printed by the central bank, plus bills and coins. The U.S. monetary base is currently $5.2 trillion
M1: All the money in all the bank accounts. This is what people consider to be their money. The U.S. M1 is currently $7.1 trillion
M2, M3, ...: time deposits, loans, ETFs, derivatives, etc.
Now, here is what bitcoiners who believe in the only-21-million-bitcoins myth overlook: While the Bitcoin monetary base is (or will be) 21 million, the Bitcoin M1 will be much higher when banks, exchanges, and lenders lend out the bitcoins that they hold.
Exactly. And those loaned btc could be sold in a way that can panic some, driving the price down after which the perps buy back the btc at a lower price and repay the loaned btc with less valuable btc while pocketing the profit.