Bitcoin or ETF: Which Should You Buy?

With the approval of a spot Bitcoin ETF, you may be tempted to rush out and add a bunch of your favorite to your trading account.

But before you do, it’s worth taking a second to decide what’s best for you and your money.

Now, we aren’t talking about whether or not you should add crypto your portfolio…

No, the fact that you are adding any amount of BTC to your portfolio is a laudable and smart move. That’s because adding even as small as a 1% allocation to Bitcoin has historically improved returns of a 60/40 portfolio.

Instead, we are talking about the choice of vehicle in which you decide to buy BTC. We are discussing fees.

Right now there is a fee war going on amongst the 12 potential bitcoin ETF providers with each attempting to undercut the next to get your business.

As of publishing, the fees range from .20% – .90%, with several offering fee-free investing for the first 6-months.

But the question isn’t really which ETF you should choose, but rather whether it makes sense to buy BTC using an ETF at all? Should you instead just buy good ‘ol BTC using an exchange?

Let’s look at the facts:

On an exchange, you pay a fee when you buy and sell.

With an ETF, on the other hand, you pay a percentage of your total investment value every single year.

Without getting into the dirty details, the answer of which to choose (direct BTC vs. ETF) really comes down to what kind of investor you are: long-term or short term.

If you are a short term trader, it probably doesn’t matter whether you choose ETF or exchange. In fact, for the next 6-months you have fee free trading capabilities with multiple ETFs.

For the longer-term investor (5+ years) though, investing through an exchange is probably your better option. This of course comes with the caveat that you are using an advanced trading platform with lower fees such as Kraken Pro or Coinbase Advanced.

Looking beyond fees though, there are some other advantages to buying bitcoin directly on an exchange like Coinbase.

1. Control: You have full control of the keys to your BTC.

2. Liquidity: ETFs only trade when the market is open. BTC trades 24/7.

3. Usability: After buying an ETF you only have two options: hold or sell. Holding your own BTC though gives you the capability to do much more if you desire: swap, buy physical goods, etc.

At the end of the day, we suggest buying BTC in any way you can get your hands on it. But there is no rush. Take your time to find the most cost-effective way to do so and you may just save yourself tens of thousands of dollars over time.