Bitcoin ETF vs Buying BTC Directly: What’s Better?
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Trades on traditional exchanges like the New York Stock Exchange
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.
The shares in the ETF are backed by BTC, which is owned and stored by the ETF provider.
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).
Managed by the ETF provider
ETFs are managed by the companies that launch them. They can pull support if they don’t meet certain criteria and can also change the fees at their own volition.
Trades within traditional US trading hours
Because ETFs trade on traditional and regulated US exchanges like NYSE, they can only be accessed during regular US trading hours.
There might be an ETF/NAV price difference
There might be a price difference between the Bitcoin ETF and the price of Bitcoin on the same day. This is because ETFs trade on their separate markets, which dictate their current price.
Pros and Cons of a Bitcoin ETF
The above characteristics are specific to Bitcoin ETFs, and they bring certain advantages and disadvantages.
Pros:
1. Regulated financial product
2. It can be included in specialized portfolios like retirement or 401(k)
3. Backed by regulated and reputable providers like BlackRock
Cons:
1. Investors do not own the underlying BTC
2.There might be a premium on the ETF compared to the BTC NAV
3. Limited trading hours and higher fees
