Holding Bitcoin: ETF vs Self-Custody

A simple comparison of pros and cons

Holding a Bitcoin ETF

A Bitcoin ETF is a traditional investment product that trades on the stock market, similar to any other ETF or stock. Instead of holding Bitcoin directly, you buy shares that represent Bitcoin held by a custodian (such as Blackrock).

People typically buy ETFs through brokerages like Blackrock, Vanguard, Fidelity, TD, Questrade, Wealthsimple, etc. You never touch Bitcoin yourself. the fund holds it on your behalf.

Pros of Holding a Bitcoin ETF

✔ Easy, familiar, and beginner-friendly
If you can buy a stock, you can buy a Bitcoin ETF. No wallets, seed phrases, or technical steps.

✔ Works in tax-advantaged accounts
A Bitcoin ETF can be held in RRSPs, TFSAs (if eligible), IRAs, 401(k)s. This can massively reduce or eliminate capital gains tax — something direct Bitcoin cannot offer.

✔ Regulated and custodied in a traditional framework
Good for people who prefer regulated environments and want compliance, oversight, and investor protection.

✔ No risk of losing private keys
Your broker handles custody.

✔ Simple for financial advisors and institutions
Professionals can include ETFs in portfolios, whereas they can’t directly manage your self-custodied Bitcoin.

✔ Suitable for passive investors
No blockchain knowledge needed.

Cons of Holding a Bitcoin ETF

✘ You don’t own Bitcoin: you own a claim on Bitcoin
You cannot move it, spend it, or use it on-chain. It’s exposure, not ownership.

✘ Custodian holds the Bitcoin, not you
You rely fully on the fund’s security and honesty.

✘ Management fees
There is a small yearly fee (0.20%–1%).

✘ Only tradable during stock market hours
Crypto trades 24/7, but ETFs do not.

✘ Zero mobility
You cannot send ETF Bitcoin to another wallet, exchange, or country. It cannot be used in Lightning, DeFi, payments, or self-custody. It stays trapped inside the financial system.

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Holding Bitcoin Directly (Self-Custody)

You are buying real Bitcoin on a crypto exchange and then withdrawing it to a wallet you control; ideally a Hardware Wallet. You hold the private keys, meaning you hold the Bitcoin itself. No company, exchange, or government can freeze or move it without your permission. This is the true form of crypto ownership.

Pros of Holding Bitcoin Directly

✔ True ownership
You hold the private keys → you control the asset.

✔ Fits the actual spirit of crypto
Bitcoin was built so individuals, not institutions, could hold their own money.

✔ Can be moved anywhere, anytime
Bitcoin is borderless. You can carry millions across borders simply by memorizing your seed phrase. No ETF can do that.

✔ Full access to the crypto ecosystem
You can use Bitcoin for:

• payments

• Lightning network

• swaps

• custody vaults

• multi-sig setups

• long-term sovereign storage

✔ Available 24/7
Send, receive, or trade anytime.

✔ No management fees
Once you hold it, it’s yours forever.

✔ Mobility advantage
Direct Bitcoin is a global asset you can move freely. ETFs cannot move outside your brokerage.

Cons of Holding Bitcoin Directly

✘ Requires responsibility
You must manage your seed phrase, avoid scams, and understand wallet basics.

✘ No tax-advantaged accounts
Direct BTC cannot sit inside RRSP/TFSA/IRA accounts.

✘ User error is possible
Sending to a wrong address or mishandling your seed phrase can lead to permanent loss.

✘ Not ideal for people who want a completely hands-off experience
Some people prefer traditional structures.

Final Thoughts

Both methods make sense, depending on your intention.

If you want simplicity, regulation, and the ability to hold Bitcoin in tax-advantaged accounts, a Bitcoin ETF is a strong option.

If you want true ownership, the ability to freely move your Bitcoin, and alignment with the original purpose of crypto, self-custody is the better choice.

Here’s the honest conclusion:

The spirit of crypto is self-custody but ETFs make sense for people who simply want price exposure inside a regulated, tax-efficient environment. Exposure is better than no exposure. When you’re ready, you can always graduate to self-custody.

Not Financial Advice.