Bitcoin Forum

I'm not trying to undermine the impact the ETF has/would have on Bitcoin, especially as a form of advertising mechanism and providing some element of legality to it.

I still don't understand why one would prefer owning an ETF rather than holding the true thing (Bitcoin).
Bitcoin ETF is more expensive to hold with fee ranging from 0.2% to 1.5% than one holding the real Bitcoin
Not to mention unlike Bitcoin, it isn't permissionless nor does it provide any private key that shows one is the sole owner.

I know that it could serve as a bridge to bring to the awareness of individuals about Bitcoin and maybe let them realise its utility and start using it.

But I'm still curious why individuals would prefer to own an ETF rather than Bitcoin itself?  Does it stem from their mistrust against anything that goes against the norm?

Note: My question stems from my miniscule understanding of ETF.Clarifications would be appreciated.  

Not all investors can gain exposure to bitcoins directly. For us regular investors, you can just log in to an exchange and buy bitcoins. Some institutions and enterprises cannot, they will go through too many legal hoops to acquire and store bitcoins like you do, they are the ones who would most utilize ETFs.

Some other use it cause they do not want to carry the responsibility of holding their investments themselves, but rely on a third party.

- Jay -

its mainly pension investors
by putting your PRE-TAX income into a ETF you save 20-40% on a purchase because its PRE-TAX income buying the shares

and in many years when its time to sell(claim your pension) you dont suffer capital gains so another X% saving, because its in a pension scheme

ETF shares are NOT a claim of ownership of indirect BTC
ETF shares are a share of a trust thats valuation is pegged to a bitcoin PRICE of total coin owned by the ETF
you cannot as a end-user investor ask to convert share to BTC

its purely a share deal shadow tracing the bitcoin PRICE

I find the idea confusing. Why buy something more expensive and less autonomous? Bitcoin's permissionlessness and private key control define it for me. Hodling actual assets is my preference, not ETFs.

A common claim is that ETFs introduce Bitcoin to folks who are wary of cryptocurrencies. I know - comfort and familiarity. But isnt Bitcoin's main goal to bypass traditional banking systems? ETFs seem to dilute revolution.

I think the desire for Bitcoin ETFs over Bitcoin may arise from a mistrust or ignorance of Bitcoin. Maybe its about security within the usual investment framework. Regardless, an ETF doesnt appeal to a Bitcoin enthusiast. I believe in direct ownership, where Bitcoin's actual value may be realized.

Bitcoin ETF is not bitcoin but an asset that has the spot price of bitcoin. The best to hold for me is bitcoin and not bitcoin ETF because I will prefer to hold what I have complete control over.

All I know is that everything is taxed in USA. You mean that those that hold bitcoin ETF shares will not later be taxed if they want to sell it?

I think it depends on your preferences:

If you have a range of assets all handled by a major bank and you wish to add exposure of Bitcoin it makes sense to simply add Bitcoin ETF to your other ETF..... no extra worries on your side...

If you wish to hold Bitcoins as an alternative to the regular banking system and want total control, then it is better have real Bitcoins in a cold wallet or so. But here you need to pay attention what you do, you can easily make your money disappear, if you misplace your private key or so....

:)

Many people are used to centralized platforms like banks and the stock exchange. They feel more secure to invest in sectors that the government has some level of control over. They trust that these platforms will manage their money more than themselves. Another issue is that many people don't also want to take responsibility for learning about the Bitcoin space because they think that it is complicated. So they prefer to use third-party platforms to help them keep their funds safe.

There is also the claim that using ETF as security or collateral in accessing loans will be more flexible. Others also think that it is easy and less complicated to transfer such ETF holdings to successors.

Most of these claims are products of ignorance. If these ETF investors knew more, they wouldn't put their funds in centralized platforms that cannot be trusted.

Remember  buying ETFs is more like buying  share but not inform of a normal financial share , investors could hold for a long time if they want without any restrictions.
Although,its sounds more of what a normal Wallet could do but I think people go for it as they could easily  follow the market trend  buy  and  sell at anytime they want without having  to deal with exchange .
However, we should always remember this, so far you partner with a third party to invest or hold your coin , you still don't  have total control over your investment.

There are countless possibilities as to why an individual would prefer an ETF over Bitcoin itself, the most reasonable being security reasons. On centralized and legal platforms, it's always protected by law. So, if something unexpected happens to the platform, then individuals as clients of the platform will receive fund protection. Another possibility could come from individuals complex ignorance about Bitcoin, so they prefer a safe zone.

Many people don't care whether they own private key or not because they're trust more in centralized institutions than online projects, especially when they can't hold their own private keys safely due to careless or too technical.

As long as the fees doesn't exceed the profit, they still earns right?

I also have a same thought, but he's correct.

Well bitcoin etf will mostly be utilized by big corporations they used to have too many rules and regulations regarding a company holding bitcoin but with etf they can now purchase bitcoin easily

Huge corporations investing in bitcoin will surely attract attention towards the coin making it more well-known among the public

I am sure some individuals would also purchase bitcoin etf instead of the actual bitcoin because of security concerns

People who are invested in ETFs are boomers, way boomer than the boomers which we have on this forum and I am sure they are directly exposed to Bitcoin instead of these ETFs.
I do not like the idea of ETFs however, the more they realize that they could have just bought the actual Bitcoin, the sooner they will do. It's great overall for the exposure of Bitcoin.

There are very little benefits that outweigh just holding BTC in a non-custodial wallet. There might be arguments that there is more liquidity from the institutions, or convenience, or maybe even insurance. Though I wouldn't call any of those theories any reason to hold or buy ETF Bitcoin over that of holding it in a wallet.

You might be able to trade it with the most perceived trust as you can do it on a stock exchange, and the product is created by some of the worlds largest institutions...though this might only be a benefit to those who are trading or who are not looking to buy and hold. Even such, it is arguable to choose the ETF over a real spot market, like on Coinbase, or Binance...if you are looking to trade. Or moreover, using a decentralized exchange where you can trade with more control over custody.

It can serve as a bridge for more awareness, accessibility and credibility for Bitcoin as a whole. Though I wouldn't call it a better instrument to hold or trade Bitcoin.

I think what @franky1 means is that if you use put your money that's supposed to go to a pension fund towards an ETF then it won't be taxed kind of like what they do with Roth IRA, it's a better retirement plan than the basics in US. Probably those that won't maximize how they'll get their ETFs will probably get taxed.

The ETF is for the tech illiterate people. Even the people who think they are informed about bitcoin lose their coins every day. We hear about them all the time. Imagine how would those rich boomers feel against bitcoin. They are totally clueless. Some of those people still want a piece from the action but they are afraid of holding btc in their wallets. These people want safety and protection. That’s why they are buying the ETF instead of the real deal. I totally understand their point of view because like I said even some the most proficient bitcoiners lost their wealth because they got hacked or they were careless.

Well, investors especially those that poured their funds on bonds and stocks were for me the one who will make a move to trust the SEC approved Bitcoin ETF. They prefer to invest on it as it is safer than the decentralized Bitcoin that runs without any regulation. Investors are just playing safe here I think.

its NOT a special thing due to being "bitcoin ETF"
the tax thing is about.. and ill say it again PENSION PLANS where your employer puts part of your income into a pension plan before tax.
and because its a pension plan you dont pay ongoing capital gains tax in a pension plan.

you might want to learn how pension plans work as thats the only reason many people would invest in an etf rather than buying real bitcoin separately with their normal income

Amid fears of Bitcoin ETF approval, investors are holding onto Bitcoin and hoarding it. But after the approval of Bitcoin, the price of Bitcoin has not shown any signs of improvement, but it is normal that the current price of Bitcoin is low. Because this year 2024 there is a lot of good news in Bitcoin so the price of Bitcoin is likely to increase to the highest level.

Most people who buy ETFs are traditional market people who have no idea how bitcoin works, or they are people who want to diversify their investments.

These people's knowledge about the fundamental part of bitcoin is zero and they think that bitcoin is a simple virtual asset, so they choose not to get involved too much, this way it is easier to acquire through ETFs.

trad-fi people that invest in wheat commodities do not understand how to farm/harvest wheat. the reason they invest in commodity trades of wheat instead of running a farm is because yes they dont understand how to farm, but they get better tax breaks and able to play the markets without needing to concern themselves with fertiliser and seed planters

but most of the population dont day-trade the market most just dump their pre-tax income into pension plans to get tax breaks on investments that hedge against inflation long term, without needing the hassle of learning how to farm, protect the land, maintain their property

I dunno, just comes down to personal preference and priorities I suppose.  Whether you want simplicity or full autonomy. 

If you've got investments with a big bank and just wanna add some Bitcoin to the mix, seems to me it'd be easiest to buy a Bitcoin ETF.  That way your Bitcoins just another holding - no extra hassle for you. 

A lot of investors that will be willing to invest in bitcoin has not done so because it has no backup for their funds when they lose in their investments. A lot of them also do not want to pass through the tussle of keeping private keys and protecting their funds from scammers, they just don’t have a choice than to go for spot bitcoin ETF. All they are after is how to double their wealth and won’t mind how much to spend for upkeep/maintenance through a third party if that will make them achieve their goal in the long run.

Large corporations, working with ETFs can make it easy to invest in bitcoin by accepting ETFs. An important barrier for investors when buying BTC is the price. Even with bitcoin currently retail investors may not be able to afford the entire BTC. In contrast bitcoin ETFs allow investors to have exposure to BTC within their budget risk tolerance and investment goals.

I would willingly hold a reputed altcoin instead of holding Bitcoin ETF. Those who are holding ETF don't really know that they aren't holding any Bitcoin and those people are paying fees for holding those ETFs. I would most probably consider holding an altcoin instead of holding that ETF.

In long term it's much safe and better to hold Bitcoin not Bitcoin ETF. However, because those ETFs can be useful for Bitcoin community as the ETF companies will spend money for advertising of Bitcoin, and only because of that I think ETFs should exist.

It's someone own choice to rather hold Bitcoin or Bitcoin ETF and I'm among those people who will Hold Bitcoin or a good altcoin instead of holding Bitcoin ETF. Others might have differing opinion and ideas about those ETFs but for me they're only good because they are promoting Bitcoin for us, nothing else than that.

I'd like to think of it as a method for people who can't directly buy crypto for some reason or just hate the idea of being their own back and instead trust centralized services to do it for them which provides a whole bunch of convenience for their side. In the first place, I don't think people will buy Bioitcoin, ETF or not, if they want to go against the norms of crypto. They might also have wanted the inherent advantages of what ETF type investments provide itself, whatever those specifically may be.

I think legality, being protected by law, is the main reason why many people choose bitcoin ETFs over real bitcoins. Many traders use large amounts of capital and they do not want to risk placing their assets on regular exchanges, they want their assets to be legally secured in case of fraud or problems.

Furthermore, not everyone knows and cares about bitcoin's outstanding features such as privacy, decentralization... what people want is just speculation and looking for short-term profits. There are many reasons why people choose bitcoin ETFs over real bitcoins.

What I think is that there is a hidden mission behind the propaganda ETF concept and it is true that everyone has different belief choices. I agree with you friend, investing in Bitcoin or other altcoins is better, only we can arrange buying and selling according to our wishes. Even though the ETF concept brings an alternative, I'm not interested yet

The impact of the Bitcoin spot ETF comes in two ways which are the advantages and disadvantages.
The advantage of the ETF is that it will create more awareness for BTC worldwide, boost more confidence in the market, encourage more institutional investors, and inject billions of dollars cash flow into the market.

The disadvantages are that this will lead to huge market manipulation, the Fed's intervention in the market, possibly institution banks taking over CEX/DEX, an increase in the level of KYC implementation, and institutions treating BTC as a fungible token.

Having said that, BTC ETF is just a fungible token and will never be the best to hold. Remember "not your keys, not your coins".

Because not everybody is interested in owning bitcoin, some people are in the game just for the gains. The don't care whether it's bitcoin, oil, semiconductors or food for pigeons, it's all about the profit they can make. So why should these type of people going through all the hassle to register on an exchange, move the dollars, get a hardware wallet, store the seed, etc etc when they can just buy bitcoin with a couple of clicks? If you're a hodler this doesn't make any sense of course but otherwise yes, it does.

Actually I believe that Not your private keys not your wallet . So if you don't have any key then you are not the owner of those Bitcoin you are or will hold. So ETF is not good source for holding bitcoin. Why you need to use ETf for holding bitcoin because there is already easy option like create a new wallet and buy by using a dca method in this case you are the one and only owner of your wallet.

People are used to not being in charge of their finances so the Bitcoin spot ETF give them that same feeling. They want others to be incharge of their finances since they can trust their ability to protect their finances if they're in control of it. We have been used to the banks and bankers holding and managing our money so most people will always find safety in centralization. Bitcoin been irreversible make people scared that they might lose their Bitcoin to hackers if they take control of their private key.

Secondly some people are just busy, they want to invest in Bitcoin but don't want to handle any risk so investing in Bitcoin ETF is the best option for them. Many people still don't understand Bitcoin to be a decentralized currency, they only see it as a means to secure their wealth and to increase their wealth too. They see Bitcoin as more of an investment so they only care about the profits that they'll getting when they invest into Bitcoin through Bitcoin spot ETF.

Bitcoin spot ETF isn't the best to hodl, hold the real Bitcoin in a non constodial wallet that you own the private key. Hodling Bitcoin ETF is just like holding Bitcoin on exchanges or on centralized platforms as you don't own those Bitcoin but just a digital representation of the Bitcoin.

It think investors just want to play it safe with their investments, but playing it safe against an instrument not necessarily controlled by the Feds in whom they strongly believe in is still putting themselves in harms way.

They should come out of their cocoons and do what's right and if they lack sufficient information, they can ask for assistance as holding Bitcoin is way better than Bitcoin ETF

As far as I know, Bitcoin ETFs are only intended for investors who don't want the hassle of having to have a Bitcoin wallet, then go to an exchange to buy real Bitcoin. then move again from the exchange to the bitcoin wallet.

ETFs make it very easy for investors who don't want to do that, just deposit their FIAT money into the exchange and immediately get a bitcoin ETF. Moreover, it still benefits from the status of an asset protected by securities.

In the long term, each investor has their own view. For those of us who play on real Bitcoin, we definitely prefer Bitcoin over Bitcoin ETF. If you can buy real Bitcoin, why should you buy a representation of Bitcoin?

Pensions are invested by companies, not the actual employees, who don't get a say in the investing at all.  They also aren't available in any sort of employer retirement plan that I know of, and if they ever were, it would be in a connected brokerage account which is not "technically" in the plan (401k/457/403b etc)..and those often are very restrictive investment wise as well.

I run the State of IL Deferred Comp plan/457b.  Err..I'm the sole advisor on the plan.  There's not a chance in hell we will offer that to state employees anytime soon.  

It's mainly for two things.. It's easy to buy if you've already got a brokerage account (which does not get tax qualified status) or an IRA, which gives you pre tax savings of course (but...it's taxed at ordinary income levels, not short/long term capital gains) OR Roth/Post tax..which could pay off as well in the long run and also will be taxed at ordinary income..  In some cases it will also only be taxed at the federal level and not at the state level..which is a nice benefit.  State of IL does not tax retirement plan withdraws, however if you drive across the state line in to Indiana and live there, you will then pay both federal and state, albeit at ordiary income levels.

The second big reason is financial advisors.  They can't make money off clients when they buy bitcoin from exchanges or OTC..but now they can purchase bitcoin (and their clients have been asking for years!) and charge a fee for it. Of course that potentially adds another 1% (or more if you're a scummy advisor) which is not in the clients best interest but 99% will be none the wiser anyhow.

OP-Bitcoin ETFs are a good thing for bitcoin. I won't ever own one..but I absolutely see the value of them and what it's doing and will do for bitcoin in the long run.  Some may not like it, but it is what it is.

It's your choice, but I find holding altcoins to be much riskier than investing in a bitcoin ETF. You won't own real bitcoin if you invest in a bitcoin ETF, but you will be protected by law and regulation if you run into problems during your investment. But if you hold altcoins, you will not receive any protection from legal authorities if the project turns out to be a scam. There are many altcoins on the market that are considered very reputable and reputable, but there is no 100% guarantee that they are safe and will never turn out to be scams. Altcoin and bitcoin ETFs, I still think bitcoin ETFs are safer.

Bitcoin ETF is a way for big institutions to hold BTC indirectly without the hassle of regulations.
Its also for those people who are not technically sound to buy and hold bitcoin.
So for people who already hold BTC in self custodial wallets, should not care about bitcoin ETFs at all.

sorry to hear that your pension plan doesnt allow any access to ETF or tailoring of investment choices.

but for others that do have access to pre-tax deposits to invest into ETF. thats why THEY would invest in bitcoin etf instead of buying actual bitcoin

Basically its for traditional stock investors who are comfortable doing their investments through their brokerage firms and they don't want to go sign up on a crypto exchange to get Bitcoin and deal with keys and actually owning Bitcoin. They don't care about Bitcoin being a currency, they just want it as an investment, and want to use the websites their are already comfortable using for investing.

ETFs allow them to buy bitcoin through their stock brokerage websites, and not worry about keys or anything.

Basically Bitcoin ETFs are going to be very popular among the TradFi crew, which includes the general public who just put a bit of money away in each paycheck for their retirement. It also includes investment firms and corporations who will find it easier to just own an ETF than going through a crypto exchange to get Bitcoin and either store it themselves or find a custody company. So ETFs open up Bitcoin to a lot of big money finance types as well as many millions of regular Americans who are just trying to save for retirement.

I don’t have a pension plan. Most employers have long done away with pensions (at least in the U.S.). For the most part, of course not across the board, it’s mainly utilized by government outlets (state/city/etc). I work for a financial company and we partner with institutions to record keep, and as for myself provide investment guidance, plan education etc for the optional retirement plan (deferred comp/457b). Pensions don’t allow participants to invest how they want, there is a financial board representing the organization as the ones who oversee the pension, how the funds are invested etc. These pensions provide lifetime income, which is very different than an employer retirement plan or individual plan (IRA)..unless they have some sort of income rider which is usually annuity based, but they aren’t very common. Pension boards have failed time and time again throughout US history and often times it’s due to mismanagement/corruption etc. So, the likelihood of the investment board purchasing such a highly volatile currency (not inherently an investment) is essentially zero, at least for now.

Employer plans such as 401ks, 457, 403b etc can offer ETFs , Mutual Funds, CITs etc..but under ERISA who regulates them (minus 457 plans) it’s HIGHLY  unlikely they would allow for a btc ETF. It wont happen for years. Recent years these types of plans have been sued by its employees every which way to Sunday for providing anything with a high beta. “I didn’t know the investment had so much risk”. You won’t even find semiconductor or healthcare sector ETFs and ETFs of that ilk in them. It’s not worth it to the employer. There’s just no point.

So it’s only going to be found in one type of retirement plan ATM and that’s IRAs. Which of course your company has nothing to do with (there are odd outliers that are very rare). But there’s going to be a heck of a lot of people who will buy these BTC ETFs in them. I’ve probably helped explain how to properly store btc to clients maybe 100 times in the past 3-4 years, and never do they go out and buy a hardware wallet and follow proper direction. They just leave the coins in their CONbase accounts, Binance etc,  So it goes to show these ETFs inside IRAs should be very popular for ease of purchase/storage and as you mentioned..tax advantages.

Have you ever read "The Mandibles", that is a good example of what could happen to the ETFs under "stress" situations, it was with gold, but it could be applicable to any other asset, such as bitcoin

This article (https://www.webharom.hu/etf-vagy-btc-melyik-a-jobb-valasztas/) claims the main reasons for choosing bitcoin ETFs over regular bitcoin investment is outsourcing security risks, for tax reasons, or for more advantageous fee structure. I would also add investor compensation schemes. If you lose your keys, you're screwed. If Blackrock loses your keys, well, you might still get lucky and get refunded.

I certainly prefer Bitcoin to a Bitcoin ETF, but I can see the appeal of going down that road for some people. If you're a traditional investor who is used to centralized platforms, contracts, and things like that, going with an ETF can be more familiar and can feel more reliable. So I think it's tailored to people who invest in other things like bonds and stocks but want to expand to Bitcoin. They don't want to worry about how Bitcoin works, how not to lose access to your coins, which platforms to use when you want to sell your coins, etc. Going with a big fund can eliminate some of those concerns.

Not to forget: If you deal with a major well established company, preferredly too big to fail, then the government possiblyy will step in to keep this company going if there are operational issues

If you are dealing with a kind of Start UP and things go wrong, then you will likely have to chase your money through the courts on your own expense..... FTX case in point.....

FTX is just a small exchange and nothing compared to investment funds with trillions of dollars in capitalization like Grayscale, Blackrock and iShares...Have you ever wondered why big investors with billions of dollars only trust those big investment funds and never trust small exchanges like Binance or FTX ? 

As for risks, everything has risks and each person will have the right choices for themselves . Holding real bitcoins in a non-custodial wallet also has risks , it is not absolutely safe as you think.

Why buy something less in control and more expensive when you can own the real deal? I hear the argument: "ETFs bring Bitcoin to scaredy-cats who don't trust crypto." Comfort zone, I get it. But isn't Bitcoin all about ditching the traditional system, man? ETFs seem like watering down the rebellion.

Maybe folks choose ETFs 'cause they're scared of the real deal, or maybe they just like things neat and tidy within the usual investment stuff. Whatever the reason, as a true Bitcoin believer, ETFs ain't your jam. You're all about direct ownership, where the real Bitcoin magic happens.

Look, there's no right or wrong here. It's all about what feels right for you. Just remember, both ways have their pros and cons. Direct ownership? Badass control, but gotta keep those coins safe yourself. ETFs? Familiar and regulated, but you gotta trust someone else with your Bitcoin.

Yup this. IRAs is where people can now invest in Bitcoin for retirement. And by later this decade there will likely be millions of people doing this. Other retirement accounts are 'managed' and they only give you certain things to invest in. I only had a 401k to invest in for a few months but I could only choose from maybe a couple dozen things to invest in, so yeah BTC ETFs are not going to be in any of those until Bitcoin is WIDELY considered a digital gold, hard money, store of value, so maybe in like 20 years realistically. As long as the 4 year market cycle exists and there are big bitcoin crashes there is zero chance any managed retirement fund is going to let people buy BTC ETFs.


But yeah like you said, and it'll probably take a while, but there are eventually going to be a heck of a lot of people getting into Bitcoin through this. Eventually there's gonna be numerous millions of Americans putting ya know like $50 per paycheck into Bitcoin ETFs for decades through their IRAs. If let's say in ten years there's 10 million Americans putting $50 per paycheck into BTC ETFs through their IRAs, that's $13 billion a year. That's a sizable amount of money that would be flowing in. And of course that's just one segment of the market that will be buying these ETFs.

Well, that's a valid concern but I think their are some good altcoins which won't run away with someone's money. I'm talking about coins like Monero, Lite Coin, Ethereum that have been active on the market for many years and have huge marketcap.

Those coins are some good coins in my eyes but surely everyone has differing opinion about altcoins and some people really can't trust altcoins at any cost. I haven't yet lost my money that I use to buy those altcoins but surely the ones who bought Luna when it was on rise have lost enough money by holding it.

That's why I prefer to hold only those altcoins that have been active on market for long term because those can be somewhat safe than the newer ones.