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Exploring Bitcoin in 2024: Direct Ownership vs. ETFs

Bitcoin (BTC), the pioneer cryptocurrency, has gained significant traction as a digital store of value and an alternative investment asset. With its meteoric rise in popularity, investors have multiple avenues to gain exposure to Bitcoin, including direct ownership or investing through exchange-traded funds (ETFs). In this article, we’ll compare the two approaches, discussing their fundamental differences, and potential fees, and offer insights into which option might be better suited for investors.

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Understanding Bitcoin

Bitcoin is a decentralized digital currency that operates on a peer-to-peer network known as the blockchain. It was created in 2009 by an anonymous individual or group of individuals using the pseudonym Satoshi Nakamoto. Unlike traditional fiat currencies, Bitcoin is not issued or controlled by any central authority such as a government or financial institution. Instead, it relies on cryptographic techniques to secure transactions and control the creation of new units.

Bitcoin transactions are recorded on a public ledger called the blockchain, which is maintained by a network of computers known as miners. These miners use computational power to validate and verify transactions, ensuring their accuracy and security. Bitcoin transactions are irreversible, meaning once a transaction is confirmed and added to the blockchain, it cannot be altered or reversed. Additionally, Bitcoin’s supply is limited to 21 million coins, making it a deflationary asset. Overall, Bitcoin offers a decentralized and secure means of transferring value globally, without the need for intermediaries or third parties.

#1 Ease of Access

Investing directly in Bitcoin involves purchasing and holding the cryptocurrency in a personally owned wallet, which can be a physical wallet (cold wallet) or a digital one (hot wallet). One of the primary benefits of direct ownership is the complete control and ownership it affords the investor. When you buy BTC directly, you have full ownership and control over your digital assets. This means you can store them in a secure wallet of your choice, reducing reliance on third-party intermediaries.

In comparison, Bitcoin ETFs offer a more indirect approach to gaining exposure to BTC. Instead of owning BTC directly, investors purchase shares of an ETF that holds BTC as its underlying asset. One of the most common misconceptions about investing in a Bitcoin ETF is that it provides “ease of access”. With more and more crypto exchanges around such as Coinbase or, it is fairly easy to acquire BTC on your own.

Another important point of comparison would be the fact that the crypto market is open 24/7 whereas the ETF market is only open on weekdays during traditional trading hours. This exposes you to the risk of a potential spike outside of trading hours in BTC price when you invest in an ETF, resulting in you either missing out on gains or getting stuck on losses. Furthermore, selling BTC directly is far easier and faster than selling securities such as a Bitcoin ETF.

#2 Security

Direct ownership also comes with its own set of challenges, particularly in terms of security. While you have control over your BTC holdings, you also bear the responsibility of safeguarding them. This includes employing robust security measures such as using hardware wallets, creating strong passwords, and securely storing private keys. Some users even implement multi-signature authentication and encryption to ensure their assets are safe and secure. On the other hand, when you invest through a Bitcoin ETF, which is usually through a brokerage platform, you just need to ensure you keep your brokerage account secure.

#3 Cost of Ownership

Another important comparison would be the cost of ownership. When you buy BTC directly, the only fees you incur would be the trading fees and possibly transfer fees if you are moving the BTC to a separate wallet from the exchange that you purchased. When buying Bitcoin ETFs, not only do u incur trading fees, but you will also incur management fees which range from 0.20% to 1.5% (source) depending on the fund you are investing with. This can heavily impact your investment and overall returns when fees are so high.

Exploring Bitcoin in 2024: Direct Ownership vs. ETFs | #3 Cost of Ownership

Additionally, direct ownership also allows investors to participate in activities such as staking or lending, which may offer additional avenues for generating returns on their BTC holdings. This can help you reduce your overall cost of ownership over time. For example, is currently offering up to 4% annualized yield on staking Bitcoin for 3 months. If you have at least US$4,000 worth of CRO locked up, the yield increases to 5%.

Final Thoughts

Both direct investment in BTC and investing in a Bitcoin ETF have their respective advantages and considerations. Direct ownership offers full control over digital assets but requires investors to manage security and navigate cryptocurrency exchanges. On the other hand, Bitcoin ETFs provide regulatory oversight and indirect exposure to BTC’s price movements. If you want to maximize your Bitcoin investment, it would be wise to invest directly so that you can have full autonomy over your assets.

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