ETFs VS Self Custody: Currency Wars 2 & VR Class 🚀

Insightful Comparison: ETFs vs Self Custody for Owning Bitcoin

Are you considering owning bitcoin through an Exchange Traded Fund (ETF) or via self custody? During a February 2024 Patreon Q&A session, the discussion touched on this topic. If you think of ETFs as a “class” on a cruise ship, they would be compared to the VR class: where you buy a ticket, wear a VR headset at home, and view a fake ocean through a camera feed. This analogy points to the fact that ETFs may not offer the same benefits as self-custody.

The Downsides of ETFs for Owning Bitcoin 📉

When you opt for an ETF to own bitcoin, you essentially pay for the privilege of obtaining a video feed of what the ship (bitcoin market) is doing without actually being on the ship. Here are some reasons why ETFs may not be better than self custody:

ETFs involve a third-party custodian.

This custodian can introduce counterparty risks.
If the custodian goes bankrupt, you could lose your investment.

ETFs may not give you full control over your bitcoin assets.

You rely on the ETF provider to manage your investments.
You may not have access to the private keys of your bitcoin.

ETFs are subject to regulatory scrutiny and may face restrictions.

Regulations can impact the performance and availability of ETFs.
ETFs may not be as flexible as self custody in terms of trading and ownership rights.

Advantages of Self Custody over ETFs for Bitcoin Ownership 💼

On the other hand, self custody offers a more direct approach to owning bitcoin. Here are the benefits of choosing self custody:

Complete control over your bitcoin assets.

You hold the private keys and have full ownership of your bitcoins.
No need to rely on third-party custodians for managing your investments.

Increased security and privacy.

Reduce the risk of hacks and theft as you are responsible for safeguarding your assets.
Keep your transactions private without the need to disclose personal information to custodians.

Greater flexibility in trading and decision making.

You can buy, sell, and trade bitcoin at your convenience without facing restrictions.
Exercise your rights as a bitcoin owner without relying on ETF providers.

Closing Thoughts on ETFs vs Self Custody for Bitcoin Ownership 🚀

When it comes to owning bitcoin, the choice between ETFs and self custody boils down to your preferences and risk tolerance. While ETFs offer convenience and accessibility, they come with their own set of drawbacks such as counterparty risks and regulatory constraints. On the other hand, self custody provides you with full control over your bitcoin assets, enhanced security, and greater flexibility in managing your investments. Ultimately, the decision between ETFs and self custody depends on your priorities as a bitcoin investor. Consider the pros and cons of each approach before making a choice that aligns with your investment goals.