What's the difference between Coinbase and an ETF?

[OgNasty]

The obvious difference between holding Bitcoin on Coinbase and owning shares of the ETF is that the exchange traded funds have a management fee attached to them whereas holding your coins on Coinbase is free...

Then there's also the need to secure a Coinbase username/password as opposed to buying an ETF in your traditional brokerage account.  Your brokerage account also might allow for shorting or options trading (I don't think options are live on the ETFs yet) or even tax free gains if it's inside a Roth IRA.  Each has their own benefits and drawbacks, but if you're investing a lot of money over a long time frame and not using a retirement account, using Coinbase and avoiding that management fee is probably the way to go.

[legiteum]

From the standpoint of the average consumer, there is no difference. It's just a different way of betting on the Bitcoin meme, which is all most people actually want to do with Bitcoin.

As for why consumers want this, I've discussed this before in the Anon Paradox: consumers want to keep their "big" money someplace... safe--even if they would like to keep their "small money" someplace anonymous.

In other words:

• Most people don't want to hide their life savings in a mattress.
• Most people don't want to put their retirement savings inside of their iPhone where they can simply lose it in a landfill.
• Most people would be afraid somebody might physically steal it from them if they kept their own savings or major holdings on their person.
• Most people don't want to build a mini version of Fort Knox in their spare bedroom.
• Most people don't like the idea of having something in their house that others might kill for.

Because of this, most people use an amazing invention of civilization called, "specialization". In other words, you work all of your life to be a great dentist, and somebody else focuses their life's efforts on, say, keeping your money safe.

That's why we have banks and other financial institutions. It's not a government conspiracy, it's just a product that consumers want and need.

And Coinbase and the ETF are really just variants of the same product.

[cryptosize]

From the standpoint of the average consumer, there is no difference. It's just a different way of betting on the Bitcoin meme, which is all most people actually want to do with Bitcoin.

Bitcoin is a meme(coin)? Interesting take.

As for why consumers want this, I've discussed this before in the Anon Paradox: consumers want to keep their "big" money someplace... safe--even if they would like to keep their "small money" someplace anonymous.

In other words:

• Most people don't want to hide their life savings in a mattress.
• Most people don't want to put their retirement savings inside of their iPhone where they can simply lose it in a landfill.
• Most people would be afraid somebody might physically steal it from them if they kept their own savings or major holdings on their person.
• Most people don't want to build a mini version of Fort Knox in their spare bedroom.
• Most people don't like the idea of having something in their house that others might kill for.

In other words, you work all of your life to be a great dentist, and somebody else focuses their life's efforts on, say, keeping your money safe.

That's why we have banks and other financial institutions. It's not a government conspiracy, it's just a product that consumers want and need.

And Coinbase and the ETF are really just variants of the same product.

I'm pretty sure a banker wouldn't like it to be a dentist...

It's much better to be able to be the sole issuer of money (unlike dentists who don't have a monopoly in their profession). You print a piece of paper that in reality is worth 10 cents and you claim it's worth $100 or even €500 or 1000 CHF. Then people are forced to enter the rat race and never escape.

I don't know if it's a conspiracy or not, but I'm pretty sure 80% of human beings are deeply insecure to trust themselves, therefore bankers (and the state) fill the niche of providing "security".

Because of this, most people use an amazing invention of civilization called, "specialization".

There is some debate about the advent of civilization and whether it really benefitted us.

Homo Sapiens started as a decentralized species (hunter gatherers/tribes of 150 people) that is slowly leaning towards centralization (urbanization).

It's not just CEX and mining pools that promote centralization... forming cities/armies/governments 10k years ago was the start of centralization.

I understand why people did it, you gain so much power compared to small tribes of hunter gatherers. Same for mining pools vs solo miners.

[BlackHatCoiner]

This either means he cannot spend them (for reasons I mentioned above) or he's probably dead/lost the keys (same speculation about Satoshi's coins).

Correct, I just wanted to mention an example of a big money heist, which in today's value would be about the same orders of magnitude as the BlackRock bitcoin reserves.

but if you're investing a lot of money over a long time frame and not using a retirement account, using Coinbase and avoiding that management fee is probably the way to go.

But, if Coinbase goes bankrupt or hacked, you don't have fund insurance, as with the ETF. I think that's the big difference between the two. Buying bitcoin in Coinbase (and leaving it there) is the equivalent of buying Coinbase IOUs, where in the ETF, you're buying a Coinbase IOU, but if Coinbase goes bankrupt, you're covered by insurance.

From the standpoint of the average consumer, there is no difference. It's just a different way of betting on the Bitcoin meme, which is all most people actually want to do with Bitcoin.

If there's practically no difference, then why did people demand ETF like that? We have bitcoin IOU since the beginning. It probably has to do with insurance. A person might want to save in bitcoin, but not like the process of entrusting these savings to an entity with no insurance. They'd rather have the option of insuring their deposit, similarly as to bank's deposits.

[Yey09]

ETF may be suitable for person if capital gains is the only that he wants. However, people who cares about adoption and idea should always buy real btc instead

[stompix]

Then, Bitcoin is more of an asset than a currency. You wouldn't ever insure a big pile of cash.

It makes no sense but you can technically insure it, and you can have your bank insure the pile of cash in your safe locker inside the bank, it's a pain in the ass for the compliance, you pay the box and insurance and you don't get interest but it can be done theoretically.

But, Bitcoin cannot turn into a liability for everyone, someone always have to have it as an asset; be it you, or Coinbase.
Isn't that correct?

Yup, pretty much.

As for not relying on other currencies, why not, the USD is the global reserve currency, and you can still have your deposit insured even if you're not in the US!

The way I understand it is: of course you can ensure my deposit. You can literally print it in the worst case scenario.

Commercial and private banks can't print money, and that's why commercial banks go bankrupt as they have done it a hundred times already in history, the only one that can print money is the CB and a CB is not taking deposits, the limit you have insured under the different scheme is how much money they can afford to pay if printing would have been that easy you wouldn't have had any bank run or bank collapse in history, right?

[legiteum]

If there's practically no difference, then why did people demand ETF like that? We have bitcoin IOU since the beginning. It probably has to do with insurance. A person might want to save in bitcoin, but not like the process of entrusting these savings to an entity with no insurance. They'd rather have the option of insuring their deposit, similarly as to bank's deposits.

Well, I guess not no difference since an ETF makes it so you can buy into "Bitcoin" with an ordinary brokerage account. But it's just a more convenient way of doing the same thing.

[spectre71]

Pretty much the same difference as an apple and an orange.

[shield132]

The main argument of the ETF is that it makes it more appealing to investors who don't want to hold their own coins, which I get it, to an extent. An investor may want to gain capital appreciation from Bitcoin long-term, without worrying about losing access to their keys. It's been also said that ETFs are convenient in terms of regulation.

Before Bitcoin, legislation is what protected your property. Examples following.

• If you buy a car, and a thief steals it, you have all the papers to prove it belongs to you.
• A thief can't just steal your house, because it's yours on paper.
• You can't have your company stolen.

This "mechanism" attracts investors. An investor won't buy a million dollars worth of gold, to keep it to their basement. Instead, they would buy a promise of that gold, because in the end, all they want is the capital appreciation, not the gold per se. The real gold is guarded and kept on secure vaults, inside banks. A thief can't just steal that gold.

How certain can investors be for the security of a Bitcoin ETF? What's the difference between that, and a centralized exchange? Both are supposed to safeguard their setups, yet we frequently notice centralized exchanges suffering from cyberattacks, resulting in clients' funds being stolen.

To be honest, I live in a country where people rarely knew what ETF was but thanks to the marketing of local banks, now many people knowand use it. For investors, ETF is really a nice addition. For example, my local bank offers me the ability to buy and sell ETFs from my mobile and internet bank, with a few clicks. In seconds I can move my funds in ETFs and opposite. After the ETF approval, I have the ability to buy and sell Bitcoin with my bank account within minutes. Till ETF approval, I had to deposit my money on an exchange, buy Bitcoin, trade, convert Bitcoin to USD and then withdraw. Now I can do it inside my bank account. This is definitely very comfortable. Because of ETFs and the ability to trade them via local internet and mobile bank, a lot of people got introduced to Bitcoin and this is one of the positive sides of ETFs that we can't deny. But on the other hand, it's taking over it and losing its purpose of being your own bank. Too much centralization to be honest.

[tranthidung]

The ETFs seems more secured than and individual having bitcoin in his or her account because I would call an exchange account a wallet.

If you can put your money in hands of others and believe that they will do the right things, go ahead.

If you can not do this, you can simply learn about Bitcoin, wallets, setup, backup, recovery and learn more about security for your time on Internet, for your devices and you can secure your Bitcoin wallets and keep your bitcoins safely by yourself. It's much better than trusting someone, some entities.

The reasons why the ETF is more secured is because is that they do not store this coins in an exchange, it must be in a very much secured wallet which either doesn't have one signature, so it will be hard for the coins to get hijacked in any way.

Exchanges and companies can be more professional than you but they can do either right things or shady things. There are many layers of protection to prevent shit happens with Bitcoin Spot ETFs but just like many industries, there are ways to exploit and shit can kick off a black swan event anytime.

Enron: Scandal and Accounting fraud. It's an example.
FTX is another example and it's in cryptocurrency industry.

[spectre71]

I can trade in and out of an ETF with basically no cost and fast within my larger portfolio.

I'm not a fan of exchanges for the same reasons everyone else is, but Coinbase seems to be used/trusted by some major players. But I am sure those custody eaccounts have allot more legalize surrounding them.

[BlackHatCoiner]

Commercial and private banks can't print money, and that's why commercial banks go bankrupt as they have done it a hundred times already in history

And who's saving the commercial bank, or at least its deposits, when it goes bankrupt? Taxpayers. Commercial banks can't print the pile of cash you want to insure out of nothing, but the state can guarantee you that in case of the bank going out of business, they can cover your losses, and even if it doesn't have the money to do that (worst case scenario), it can either print it, or borrow it in exchange for bonds.

I think this is the big difference between ETF and simply storing it in your Coinbase account. In the former, in the worst case scenario your bitcoin is insured. If their partners (e.g., Coinbase) are hacked, you'll be refunded in fiat currency.

[Wendu010]

appealing to investors who don't want to hold their own coins, which I get it, to an extent. An investor may want to gain capital appreciation from Bitcoin long-term, without worrying about losing access to their keys. It's been also said that ETFs are convenient in terms of regulation.

Before Bitcoin, legislation is what protected your property. Examples following.

• If you buy a car, and a thief steals it, you have all the papers to prove it belongs to you.
• A thief can't just steal your house, because it's yours on paper.
• You can't have your company stolen.

This "mechanism" attracts investors. An investor won't buy a million dollars worth of gold, to keep it to their basement. Instead, they would buy a promise of that gold, because in the end, all they want is the capital appreciation, not the gold per se. The real gold is guarded and kept on secure vaults, inside banks. A thief can't just steal that gold.

How certain can investors be for the security of a Bitcoin ETF? What's the difference between that, and a centralized exchange? Both are supposed to safeguard their setups, yet we frequently notice centralized exchanges suffering from cyberattacks, resulting in clients' funds being stolen.
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