> if the ETF can be redeemed freely

Not just freely, but without any substantive delay.

> If the ETF price is $60/BTC and the spot is $85/BTC, there's a huge incentive for investors to buy ETF and redeem and then sell in the spot market, even if it takes days.

Once you think this through, you will come to the conclusion that the mean-squared deviation of the (spot-ETF) is related to the speed at which the shares can be redeemed. Modern investors quickly lose faith in any derivative that does not track the underlying.

If you want an example: Shorting of bank stocks was banned by the SEC during the Lehman meltdown. The bank index ETFs went nuts, and the levered ones never really recovered. (See SKF. Those of us who predicted the meltdown made a lot less money because of it.)