But with more banks, institutions, and CEXs trying to custody the BTC and creating ETFs, options, and perhaps other derivatives in the future, how can we be sure there won't be an "infinite" supply of these synthetic "shares" of BTC?
It's one of reason why phrase "Don't trust, verify" sometimes mentioned on Bitcoin and cryptocurrency community. Although it's hard to that you usually rely on data they share and result of audit done by 3rd party.
You can't tell people they shouldn't buy BTC ETFs because not everyone is interested in self custody. Not everyone is interested in self-custody because to some, that's the quickest way to lose their coins. Image telling a millionaire to start learning how to keep their coins safe though all his business life, he had had to depend on banks and other entities to secure his money. That's the essence of the ETF.
FWIW if someone cares about maximizing profit, he would learn that BTC ETF have higher fee compared with exchange trading and withdraw fee. That means he'll look for other ways, including self-custodial.