#ETFvsBTC Bitcoin ETF vs Buying BTC Directly: What’s Better?
A spot Bitcoin exchange-traded fund (ETF) has been one of the hottest topics over the past few years. Many investment companies, both traditional and crypto-oriented, have been filing multiple applications with the United States Securities and Exchange Commission over and over again.
On January 10th, 2024, the SEC finally gave the go-ahead and greenlighted a total of 11 Bitcoin ETF applications.
Because the ETF is a traditional investment product, it trades on regulated exchanges on Wall Street, such as the New York Stock Exchange. ETFs don’t trade on cryptocurrency exchanges like Binance.
Investors don’t own the underlying BTC
Owning an ETF doesn’t grant ownership to the underlying product. Think of it as a synthetic asset that’s built on top of BTC, and it tracks its price. Investors who buy the ETF don’t have to worry about storing and safekeeping BTC.
There are acquisition fees depending on the ETF provider
There are multiple Bitcoin ETFs, and each of them comes with different fees stipulated by the provider. In the case of BlackRock’s Bitcoin ETF (IBIT), there’s a sponsor fee of 0.25% (T&C apply).
Pros and Cons of a Bitcoin ETF
Pros:
Regulated financial product
It can be included in specialized portfolios like retirement or 401(k)
Backed by regulated and reputable providers like BlackRock
Cons:
Investors do not own the underlying BTC
There might be a premium on the ETF compared to the BTC NAV
Limited trading hours and higher fees
Buying BTC Directly
As opposed to ETFs, buying Bitcoin directly provides you with ownership over the BTC, regardless of whether you buy it from an exchange or P2P.
Of course, if you do buy it through an exchange such as Binance, you should consider self-custody. This means that you should take your BTC off the exchange and transfer it into a cold wallet such as Trezor or Ledger, where you control the private keys.
