Cryptocurrency
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.
It’s been a hard-fought battle spanning many years, and if you want to check out the full timeline of the events, take a look at our detailed article on the matter:
Timeline of Events Leading to Spot Bitcoin ETF Approval in the United States
With the approval already a fact, it’s now critical to explore a very important subject – the difference between buying a spot Bitcoin ETF and buying Bitcoin directly and what might be better for you.
Here’s a quick table of comparison between both, while the following article provides a more in-depth look.
What is a Spot Bitcoin ETF?
Exchange-traded funds have been a cornerstone in the world of traditional finance for many years.
In essence, an ETF represents a basket (or individual) of assets, and it trades on an exchange just like a regular stock does. It can track the price of various types of assets, including but not limited to securities, commodities, or other assets. It can track multiple assets or just one (as is the case with the spot Bitcoin ETF).
In the case of the Bitcoin ETFs, they provide a traditional and well-regarded investment vehicle to gain exposure to the price of BTC.
There is, however, a technical difference between the ETF itself and the asset that it tracks. Since the ETF itself is a standalone product – it has a market of its own and trades independently of the asset that underpins it. This is why there might be a difference between the ETF price and the net asset value (NAV) of the underpinning product.
There are other important takeaways that characterize the Bitcoin exchange-traded funds, so let’s have a look at a comprehensive summary.
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:
- 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.
In crypto, there’s a popular saying that goes like this:
“Not your keys, not your Bitcoin.”
This also comes with certain responsibilities. Keeping your crypto safe can be a challenging task, especially if you have no prior experience. Worry not, however, as we’ve prepared a detailed guide on what you can do to make sure your BTC is safe.
9 Tips for Securing Your Bitcoin and Crypto Wallets You Must Follow
Just as it is with ETFs, buying Bitcoin directly has its specifics. Here’s a quick summary.
Trades on cryptocurrency exchanges
You can’t buy Bitcoin on the New York Stock Exchange. You have to use a cryptocurrency exchange. The most popular ones are Binance (outside of the US) and Coinbase (US).
Investors get direct ownership of BTC
Once you buy spot BTC on a cryptocurrency exchange – you own it. You can transfer it out of the exchange to a cold storage, or you can use it to trade against other altcoins such as Ethereum.
Acquisition fees vary between crypto exchanges
Unlike ETFs, there’s no Sponsor fee. There are, however, trading fees associated with buying and selling BTC, and they vary based on the cryptocurrency exchange of choice.
Managed by you
Since you have complete ownership over the BTC you bought, you are also responsible for its safety. Self-custody comes with certain challenges, and it’s imperative that you learn about cold storage and how to keep your crypto safe.
Trades 24/7, irrespective of traditional working hours
Cryptocurrency exchanges work around the clock, so there are no limitations in terms of trading hours or weekends.
Direct exposure to the BTC price
You don’t have to worry about differences in the price of the ETF and the net asset’s value. You’re as exposed to the BTC price as it’s physically possible.
Pros and Cons of Buying BTC Directly
Here are the advantages and disadvantages:
Pros:
- You get direct ownership of the BTC you buy
- You can get full control through self-custody
- Unlimited trading hours and lower fees
Cons:
- Storing your BTC can be challenging and requires higher technical expertise
- Can’t include it in traditional retirement plans and 401(k)
- Not recognized as a financial instrument
Bitcoin ETF vs. Buying BTC Directly: What’s Better?
The above comprises the most essential differences between a spot Bitcoin ETF and buying BTC directly.
There’s no one answer as to which is better, and it strongly depends on the individual preferences and needs of the investor.
For instance, if you’re not tech-savvy, not interested in trading BTC against other altcoins, want long-term exposure without having to worry about safekeeping your crypto, and don’t mind the higher fees, an ETF might be the better option.
However, if you are well-versed in the crypto field and prefer direct ownership of BTC because you want to either safely store it on your cold wallet or you want to trade it actively against other altcoins, then perhaps buying BTC directly is the way to go.
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Bitget, a Seychelles-based crypto exchange, has unified its native cryptocurrencies, Bitget Token (BGB) and Bitget Wallet Token (BWB), into a single utility token, BGB.
The move has led to an impressive 22% rise in Bitget Token’s price in the last 24 hours, pushing it to an all-time high (ATH) of $8.45.
In addition, the company revealed that they will burn a whopping $5 billion worth of BGB tokens in a newly unvelied whitepaper.
Token Merge Sparks Market Enthusiasm
At the time of writing, data from CoinGecko showed that the asset’s value had increased by more than 125% over the past seven days, outperforming the global crypto market, which lost 1.50% of its worth in that period. In addition, it has done better than similar centralized exchange (CEX) tokens, which are up about 12.70% on average.
The uptick is even more pronounced across extended periods, with BGB jumping more than 160% in the last fortnight and almost 430% over 30 days. Further, the token’s current price is a massive 1,346.2% improvement over its level from the same time last year, potentially making it the best-performing CEX cryptocurrency of 2024.
BGB’s current market capitalization of over $11.7 billion has propelled it into the #19 position among the largest-capped cryptocurrencies, leaping Stellar (XLM), Polkadot (DOT), and Hedera (HBAR).
In addition to the merger, the team revealed a considerable burn of more than $5 billion worth of tokens, which surely played a role in the price uptick. This represents over 40% of the total supply of BGB.
Utility and Real-World Integration
According to Bitget CEO Gary Chen, the merger will grow BGB’s utility, with plans to use it in decentralized applications (dApps) and major blockchain ecosystems. The integration will also reportedly extend to staking in decentralized finance (DeFi) protocols and to power essential services such as multi-chain gas fee payments.
Beyond the blockchain, the exchange intends to position BGB as a key enabler of real-world applications by allowing payments for dining, travel, and shopping, among others, through its Web3 PayFi service.
The company has assured BWB holders that their assets will be transitioned to BGB through an automated swap process that will convert each BWB token to BGB at a pre-determined ratio. Any remaining BWB has been earmarked for burning to bolster the unified asset’s scarcity and long-term value.
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[PRESS RELEASE – George Town, Cayman Islands, December 27th, 2024]
As the cryptocurrency sector continues its evolution, SimpleSwap, a user-friendly cryptocurrency exchange platform, has shared its market insights for 2025. Analysts from SimpleSwap, Rick S. and Henry B., have provided an overview of anticipated trends that may shape the industry in the coming year.
Tokenization of Real-World Assets (RWA)
Blockchain technology is poised to play a pivotal role in tokenizing real-world assets (RWA), including stocks, bonds, real estate, and commodities such as oil and precious metals. According to Henry B., this advancement could broaden access to traditionally illiquid assets, integrating them into decentralized finance (DeFi) ecosystems and enhancing their tradability.
Developments in Meme Coins
Meme coins are expected to maintain their prominence within the crypto market. Emerging blockchains like Base and Sui may serve as platforms for new meme coin projects. Analysts note the growing influence of artificial intelligence in streamlining the creation, promotion, and trading of these coins, which may further simplify the process for developers.
Bitcoin and Institutional Strategies
Analyst Rick S. anticipates that MicroStrategy will continue to increase its Bitcoin holdings, potentially reinforcing its position as a significant institutional player. This activity may align MicroStrategy’s stock performance with broader market trends in cryptocurrency.
Ethereum’s Prospects
Ethereum (ETH) is projected to reach new all-time highs, driven by its ecosystem’s expanding adoption and innovative developments. Analysts highlight Ethereum’s role as a foundational blockchain supporting numerous decentralized applications (dApps) and protocols.
Regulatory Shifts in the U.S. and Europe
Changes in the regulatory landscape could impact the crypto industry significantly. SimpleSwap analysts suggest that shifts in U.S. policies and proposed European legislation may aim to enhance transparency and compliance in the sector.
Continued DeFi Expansion
DeFi is expected to experience further growth, with total value locked (TVL) increasing across key areas such as cross-chain exchanges, decentralized derivatives, and restaking. Custom Layer 1 networks designed specifically for DeFi applications could also emerge.
Solana’s Growth Trajectory
Solana may see significant growth in adoption, attributed to its high transaction speeds and cost-efficiency. The blockchain remains a popular choice for meme coins and DeFi projects, potentially positioning it as a competitor to Ethereum.
Market Capitalization Milestones
The cryptocurrency market’s total capitalization is expected to reach new all-time highs, driven by leading cryptocurrencies such as Bitcoin and Ethereum, alongside strong performance from altcoins.
Institutional Interest in ETFs
Exchange-traded funds (ETFs) for Bitcoin and Ethereum are anticipated to continue attracting both retail and institutional interest. Analysts also predict the introduction of ETFs for other prominent cryptocurrencies, which could diversify investment opportunities.
Broader Adoption in Emerging Markets
Cryptocurrencies are expected to gain traction in regions with economic instability, offering alternatives to depreciating national currencies. Enhanced crypto payment tools and tax services may support adoption, providing financial solutions in these areas.
Role of Artificial Intelligence
Artificial intelligence is projected to have an increased impact on trading and DeFi operations, facilitating automated strategies and fund management through AI-driven insights.
For further insights, users can visit the SimpleSwap Analytics section or follow the platform on TradingView.
About SimpleSwap
SimpleSwap is a cryptocurrency exchange platform offering fast, secure swaps and supporting over 2,500 cryptocurrencies. With features such as fiat-to-crypto transactions and cross-chain exchanges, SimpleSwap aims to make cryptocurrency accessible to all users.
Disclaimer
This publication is for informational purposes only and does not constitute investment advice.
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The ongoing political turmoil in South Korea has had a ripple effect on the country’s financial market. The South Korean won has dropped to its lowest value against the United States dollar since March 2009.
This devaluation is reflected in the Bitcoin Kimchi Premium, a metric showing the gap between BTC’s price in South Korea and other countries. On-chain data from CryptoQuant reveals that local investors spend as much as 3% more to buy BTC than global crypto users.
South Korean Political Troubles
Jeff Park, the Head of Alpha Strategies at Bitwise, shared insights into the present political troubles in South Korea. He explained that the country’s lawmakers recently filed a motion to impeach the Prime Minister and interim president, Han Duck-soo. This comes just two weeks after the parliament impeached President Yoon Suk-yeol, who has ruled the Asian nation since May 2022.
The president’s ousting came after he tried to implement martial law in the country to protect it from “anti-state” forces. Enforcing martial law involves conferring authority from civilians to the military. This rule suspends the civil right to freedom of the press and assembly and downsizes the power of government agencies and the courts.
Highlighting how the ongoing political turmoil concerns global democracies, the Bitwise executive wrote:
“The use of impeachment as a political tool, combined with allegations of foreign election interference, underscores the fragility of democracy in the face of disinformation. This is not just a Korean story; it’s a warning for democracies worldwide.”
Impact on Bitcoin Kimchi Premium
News about South Korea’s acting president’s impeachment triggered the won’s drastic devaluation.
Crypto asset prices are usually higher on South Korean exchanges than on foreign trading platforms, primarily because of the country’s regulators’ stringent capital control policies. At the time of writing, BTC was 144,450,000 won ($98,000) on the South Korean exchange Upbit, compared with $95,100 on the American exchange Coinbase.
Past reports show that an increase in the Bitcoin Kimchi Premium often indicates a bullish streak on South Korean crypto exchanges.
Despite the increased price gap, local investors have rapidly flocked to dollar-denominated assets like BTC as a haven from the struggling won.
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