Owning a Bitcoin ETF may be more expensive than simply purchasing Bitcoin on an exchange. Here’s why: Cryptocurrency exchanges typically charge one-time fees to purchase Bitcoin while owning a Bitcoin ETF incurs an annual expense ratio fee.
Say, for example, you want to buy Bitcoin on Binance.US, one of the low-fee leaders among crypto exchanges. You would likely pay 0.1% of your purchase price as a fee. This is drastically less than you might pay over the course of a year when you invest in a Bitcoin ETF, which all charge at least 0.50% per year.
But this trading fee isn’t all you have to keep in mind. You should also consider if you’ll want to transfer your Bitcoin off of your exchange to a separate hot or cold crypto wallet. If that’s the case, you’ll likely be on the hook for withdrawal fees, which are typically pretty small but vary by exchange.
At Binance.US, these clock in at $0.0005 per withdrawal transaction for Bitcoin. Depending on the amount of Bitcoin you’re transferring, that likely works out to be pretty negligible but is still important to keep in mind.
You’ll also want to consider your exit strategy. Even HODLers, or those Bitcoin investors who are holding on for dear life and plan to stick with the cryptocurrency long term, will likely eventually want or need to sell portions of their holdings. That means paying a trading fee again when you sell.
On Binance.US, you’d probably expect to pay about 0.2% of your Bitcoin’s value in total buying and selling it and ever so slightly more if you move it off of the exchange at any point during that process. That said, shorter-term holders of a fund may not mind the comparatively higher fees they incur because of the convenience ETFs provide.
The author(s) held no positions in the securities discussed in the post at the original time of publication.
