RE: At some point all the big Macro Funds will have a 1% position in Bitcoin
Most likely it will happen the same way that retail pushed prices to all time highs in 2017 - FOMO. One fund will dip their toes in and then another, and then another etc etc etc.
Regarding volume, keep in mind that there are also billions traded OTC every day as well, something not included in the numbers shown on public exchanges. So, the liquidity might not be as terrible as it may seem on first glance.
Regarding cash settled futures vs. physically settled, that only will hold true if you believe some other ETF will be approved besides the VanEck/CBOE proposed fund, which is physically settled. In this instance I think their name recognition, history of dealing with these things, and connections will ultimately help them get theirs through first or one of the first.
I have not been following the progress of every proposed fund. It theirs is approved first, then I will be happy to have been wrong!
These guys claim to be offering physically settled products as well, though I haven't researched them much:
https://www.investinblockchain.com/coinflex-offer-crypto-futures/
VanEck and CBOE refiled with the SEC their physically settled bitcoin ETF product:
https://www.coindesk.com/cboe-re-files-vaneck-solidx-bitcoin-etf-proposal