BITCOIN ETFs vs. Direct Investment in BITCOIN
Investing in crypto ETFs and directly buying crypto provide exposure to cryptocurrency. However, there are many differences between the two.
For many investors, the simplicity of using crypto ETFs will offset its drawbacks, such as higher fees and less control. It’s a significant advantage to buy and sell crypto ETFs like any other fund and hold them in the same brokerage account as your other investments.
However, crypto enthusiasts likely prefer to buy crypto directly. Many coins can be divided into tenths, hundredths, thousandths, or even more granularly, allowing direct investors to buy or sell precisely the amount of each coin they select. Direct investment also has lower costs and the ability to trade at all hours of the day.
*Is it better to buy BTC or BTC ETF?
If long-term price performance is your only investment goal, then the new Bitcoin ETFs make a lot of sense. However, you could prefer direct-asset ownership of Bitcoin if you are concerned about the regulatory or legal aspects of crypto.
*What are the risks associated with bitcoin ETFs?
Key Risks to Consider
Extreme Volatility: Bitcoin is notorious for its substantial price fluctuations, making ETFs that track its price inherently high-risk investments.
Pros and Cons of Crypto ETFs
Pros
• Provides easy exposure to crypto markets without having to learn about wallet setup or other complexities of blockchain technology.
• There is no need for the investor to hold cryptocurrency directly, meaning less exposure to hacking risk or loss.
• Professional fund management in a space that moves quickly and comes with many complexities.
Cons
• Fees tend to be higher than other ETFs.
• Investors do not own the cryptocurrency directly, and they must defer to the fund's management strategy.
• Unlike cryptocurrencies, ETFs can only be traded during market hours.
• Crypto markets on which the ETFs are based still largely unregulated.