I think people that are buying ibit don't know what cold storage is, they are just making a bet on the price action. But you are right, 

 NuMbEr gO uP 

 You are right it must be settled in dollars.  However, it was never your bitcoin and you’re selling ibit shares back to the market, not to Blackrock.  Blackrock’s bucket increases and decreases based on whether people want to give them dollars to convert or receive dollars. 

 Bingo. Some funds do allow withdrawing actual bitcoin (see in-kind redemption), but not in US bitcoin funds yet I think. Better not to risk it anyway, if possible. 

 I personally would never do it that way, but just another example of using the average person to game something.

Buy it yourself. Don't get someone else to do it.