Direct Bitcoin Investment Vs Bitcoin ETFs: Which One Is Better?

Spot Bitcoin ETFs Reach $10 Billion Milestone in Just One Month

Introduction to Bitcoin ETFs

ETFs are exchange-traded funds that track the value of Bitcoin or derivatives and represent it in the form of shares. Bitcoin ETF shares are listed on traditional stock markets and they are regulated by federal agencies.

In the United States, Bitcoin spot ETFs are approved and supervised by Securities and Exchange Commission (SEC). After a prolonged delay, the SEC finally green light 11 Bitcoin spot ETF applications on 10th January 2024.

The historical moment is set to be a game changer for Bitcoin with massive inflows from institutional investors added to the blockchain markets. Bitcoin ETFs make the digital asset accessible to traditional investors who can trade ETF shares via their stock brokerage accounts. In this manner, individual and enterprise investors can seek exposure to Bitcoin without directly purchasing it.

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How to Purchase Bitcoin ETFs?

It is important to note that Bitcoin is a digital asset that is issued via the blockchain of the eponymous noun. Unlike paper money, digital assets exist in the form of a code. Therefore, investors have to use decentralized or centralized exchanges to purchase different types of digital assets.

In the same manner, accredited investors may also invest in digital asset-based derivatives such as forwards, futures, options, etc. However, Bitcoin ETFs are not listed on crypto trading platforms.

These currencies are listed at traditional stock exchanges such as NASDAQ and CBOE etc. Bitcoin ETFs issue shares that track the value of backing reserves in the form of Bitcoin units or derivatives. In general, ETFs allow investors to purchase the value of an underlying security or commodity in the same manner as an index fund.

In this way, ETFs bring more clarity for investors who are able to manage a cryptocurrency portfolio without a digital wallet or cold storage account. Different types of funds such as IRAs and retirement accounts may also add Bitcoin ETF shares.

Bitcoin ETFs Vs Direct Bitcoin Investments

Here are the main differences between investing in Bitcoin through spot markets and ETFs:

Accessibility

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A Bitcoin ETF investor can access the value of digital assets through a traditional brokerage account that they use to purchase and sell shares. Meanwhile, investors need to create an account at a digital currency exchange in order to purchase Bitcoin using fiat currencies, stablecoins, or other cryptocurrencies.

Regulatory Clarity

Bitcoin ETFs are regulated by a federated regulatory agency such as the Securities and Exchange Commission (SEC) in the USA. However, centralized exchanges are regulated while decentralized exchanges have limited regulatory purview.

Propriety

When it comes to Bitcoin ETFs, investors do not purchase Bitcoin directly but rather purchase shares of the funds that represent and track the value of the underlying asset class. In contrast, direct investors are able to purchase Bitcoin directly from other investors through trading platforms.

Liquidity

Bitcoin ETFs are traded within the hours when markets are open for trading which are the same as the traditional stock exchanges. In contrast, cryptocurrency exchanges remain operational at all times as the result of the digitized trading infrastructure.

Diversification

Investors can diversify their stock portfolio by adding Bitcoin ETF shares to the mix. On the other side, Bitcoin investors may purchase Bitcoin directly but they may purchase Bitcoin forks such as Bitcoin Cash, BSV, Dash Coin, etc.

Management Model

Bitcoin ETFs are managed and supervised by qualified and experienced managers. On the other hand, any can purchase Bitcoin from the spot market and self-manage it based on a trading strategy that they deem suitable.

Conclusion

Bitcoin spot ETFs in the United States have gathered the attention of investors from all parts of the globe. Investors are rushing to purchase Bitcoin ETF shares since the approval of 11 applications on 10th January 2024 listed at major stock exchanges such as NYSE, NASDAQ, and CBOE BZX. Investors may also access Bitcoin ETF shares via brokerage firms such as Charles Schwab, Robinhood, Fidelity, and Interactive Brokers etc. 

Author: Isacco Genovesi

Isacco writes news articles, reviews and guides about cryptocurrencies including technical analysis, blockchain events, coin prices marketcap and detailed reviews on crypto exchanges and trading platforms.

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