Bitcoin ETF vs. direct purchase: What should you consider when investing?

Almost 10 years after the first application for a Bitcoin Spot ETF by the Winklevoss brothers, the time has finally come: The SEC approves 11 Bitcoin Spot ETFs from BlackRock, Grayscale, Fidelity and Co. But what is a Bitcoin ETF and what do they mean for Bitcoin? Who are ETFs suitable for anyway and would it possibly be advisable to buy Bitcoin directly instead of investing in an ETF?

After years of tug-of-war with the North American Securities and Exchange Commission (SEC), asset managers can finally cheer: on 10.01.2024, the first 11 Bitcoin Spot ETFs were finally approved. Gary Gensler, CEO of the SEC, publishes a Statement on the SEC homepage, in which, from the Commission's point of view, he once again distances himself from recommending investments in Bitcoin: “While we approved the listing and trading of certain spot Bitcoin ETP shares today, we did not approve or endorse Bitcoin. Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto.”

Whether Gary Gensler personally endorses Bitcoin or not doesn't matter in this case. Many journalists have been commenting on the ETF approval as inevitable for weeks. This is undoubtedly a big step for major asset managers such as BlackRock, Grayscale and Fidelity, who have been fighting for approval for years. However, it is an even bigger step for Bitcoin itself, as the effects of these new spot ETFs could significantly contribute to the broad acceptance, social integration and future pricing of Bitcoin.

But behind the current media hype are some important questions that you should ask yourself if you want to invest in Bitcoin and are considering an ETF: What exactly is a Bitcoin Spot ETF and what are the differences compared to direct investments in Bitcoin? Who are these ETFs suitable for anyway and which important features of Bitcoin do ETF investors have to forego? What impact could ETF approval have on the Bitcoin price and the global adoption of Bitcoin in the future?

We'll take a closer look at these questions and more in this article.

What is the Bitcoin Spot ETF?

A Bitcoin ETF (Exchange-Traded Fund) is a financial product traded on the stock exchange that allows private individuals and especially companies to invest in Bitcoin without having to buy the cryptocurrency directly. The differences between these new spot ETFs and the existing Bitcoin Futures ETFs are significant in some cases:

1. Direct investment: A Bitcoin Spot ETF invests directly in Bitcoin. This means that a provider of spot ETFs buys and holds actual Bitcoin to cover its financial product. Futures ETFs, on the other hand, are simply based on agreements to buy or sell Bitcoin at a fixed price at a specific, future date. No Bitcoin is held to cover these futures contracts.

2. Price fixing: The value of the spot ETF is closely linked to the current Bitcoin price, as the ETF is backed by real Bitcoin. The value of futures ETFs, on the other hand, depends on the price movements of Bitcoin futures contracts, which in turn are influenced by the Bitcoin price, but also by other factors such as current value decline (contango or backwardation) and market liquidity.

3. Storage and safety: With Spot ETFs, asset managers must take care of securely storing and managing the “physical” Bitcoin, which means an additional risk. In turn, this is not necessary for futures ETFs, as no holding of physical Bitcoin is required.

Spot ETF as a milestone for Bitcoin

Although there has been no fundamental change in Bitcoin, the approval of ETFs is a strong signal for Bitcoin. The potentially large amount of new capital in the market could massively drive global Bitcoin acceptance. An ETF now also offers traditional and, above all, institutional investors easier regulatory access to investments in Bitcoin. We are also currently experiencing a media paradigm shift. While Bitcoin was ridiculed and criticized by many recently, some of these people have now changed their mind and are now speaking out in favour of Bitcoin. This shift in Bitcoin perception could sustainably contribute to the widespread social adoption and integration of Bitcoin into the existing financial structure.

Assuming that demand for spot ETFs goes as expected and hundreds of billions flow into the ETFs, then the volatility of Bitcoin should also fall in the long term and make the digital asset more stable in the long term. Because the higher the market capitalization, the more difficult it is for individual players to influence the Bitcoin price through their trading activities — according to the theory. With the new spot ETFs, asset managers must cover their ETF products 1:1 with Bitcoin, which is why the new capital also flows directly into Bitcoin when the ETFs are traded. Should Bitcoin ever be able to serve as a hard standard and unit of account, the volatility must decrease first.

Lastly, you have to highlight the simplicity of investing in Bitcoin through ETFs. As a rule, you don't need any technical knowledge or advanced knowledge about Bitcoin to invest in Bitcoin using ETF. The KYC and AML processes for consumers are usually easier with trading platforms for ETFs than with cryptocurrencies. In addition, you don't have to be familiar with trading, different order types or address formats and, above all, you don't have to deal with the secure storage of Bitcoin and key management.

Even though spot ETFs are a step in the right direction, there are significant differences to buying and storing “real” Bitcoin directly.

Bitcoin ETF or direct purchase of “real” Bitcoin?

It is not for nothing that the credo “not your keys, not your coins” has become established among Bitcoiners and has often been proven. Just think back to the FTX debacle and imagine how many investors lost their money there because they thought their Bitcoin was safe on the exchange.

Of course, you can't compare Spot ETFs from BlackRock with the questionable activities of FTX, because Spot ETFs are traded on regulated exchanges and are subject to appropriate supervisory and compliance standards. This provides a certain level of security. And yet ETF investments provide a high level of security and control — let's now look at the benefits of buying Bitcoin directly:

  • Full control and freedom: Only if you buy Bitcoin directly and use a non-custodial or self-hosted Bitcoin wallet do you have full and autonomous control over your private keys, which means that you are in true possession of your Bitcoin. With your own wallet, you can not only keep your digital assets safe, but you can also make transactions and make purchases or sales at any time — regardless of traditional bank opening hours or days of the week. ETFs cannot be sent, nor can you buy anything with them. In addition, the trading of Bitcoin ETFs is linked to the opening hours of the stock exchange.
  • No need to trust third parties: Once you've sent your Bitcoin to a secure wallet, only you have access to your Bitcoin — true to the motto “Be your own bank.” When investing in ETFs, you have to trust asset managers, e.g. BlackRock as an ETF provider. In this case, you do not own the private key yourself, but delegate responsibility for storing the Bitcoin and thus also the right to send it to the asset manager.
  • Innovation: Bitcoin has undergone a breakthrough development through the implementation of the Lightning Network, which has the potential to significantly optimize its functionality as a means of payment. The Lightning Network allows lightning-fast transactions at very low costs, making Bitcoin a means of payment suitable for everyday use. In addition, work is also being done on numerous other innovative developments, from which you can usually only benefit if you actually participate in the network and hold “real” Bitcoin. Investors in Bitcoin ETFs are denied this decisive added value.


Deciding between Bitcoin ETFs and direct Bitcoin ownership is about carefully weighing your personal priorities and risk tolerance and choosing the option that suits you best. Just ask yourself what financial goals you have, what you would like to use Bitcoin for and how much time and interest you would like to invest in Bitcoin.

Regardless of which path you ultimately choose, Bitcoin remains an exceptional asset that has already fundamentally changed the financial world. The mere fact that Bitcoin exists and works will continue to shape the way we think about money and transactions. The approval of spot ETFs yesterday is definitely a milestone in the history of Bitcoin.

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This article does not constitute investment advice and includes the personal opinions of several people. Investing involves risks. Any financial investment can result in the loss of invested capital. Your own research should always be carried out before concluding a transaction.