Purchasing a Bitcoin ETF and buying Bitcoin are not the same. In this article, I provide three reasons why I encourage people to buy Bitcoin rather than a Bitcoin ETF. Join The Manitoba Blockchain Association to learn more about Bitcoin and other cryptocurrencies.
Reason 1: A Bitcoin ETF Increases Counter Party Risks
Self-Custody
One benefit Bitcoin provides to users is self-custody, which is a term to describes one's ability to control digital money fully, similar to physically holding cash. While online banking applications create the impression one's account is entirely in their control, banks can restrict access to people's funds and prevent them from being withdrawn or transferred. Bitcoin is different in this respect, as it unconditionally allows complete control over one's money, providing a unique asset class for investors. In order to invest directly into Bitcoin, a user requires a crypto wallet and to send Bitcoin to their Bitcoin address. To learn about the easiest ways to buy Bitcoin and choosing a wallet, check our LinkedIn page for more information.
A Bitcoin ETF Requires Trusting Financial Systems
To invest in a Bitcoin exchange-traded fund (ETF) provides an investor with a different level of control compared to investing in Bitcoin on the Bitcoin network. This is because a Bitcoin ETF requires trusting the financial system to ensure one's funds are secure and accessible. It is crucial to understand that Bitcoin was created as an alternative to the current financial system by allowing for the store and exchange of value outside of the control of banks, governments, or any other centralized entity. If a person chooses to purchase Bitcoin through the current financial system as an ETF, they are unsubscribing from the key feature of self-custody.
When banks or financial technology companies hold funds for individuals, they can restrict access to one's funds. There are also counterparty risks like bankruptcy, cyber-attacks, and fraud. These risks are non-existent on the Bitcoin network. Holding Bitcoin and cryptocurrencies does not require you to review hundreds of pages of legal documents citing the risks of the network because it is a decentralized network that has proven to be incorruptible and secure. Additionally, there likely are more fees paid when purchasing a Bitcoin ETF, and the ability to sell a Bitcoin ETF is more limited than selling Bitcoin. This is because crypto markets are available 24/7/365, unlike the stock market, which does not trade evenings, weekends, or overnight.
Reason 2: Banks & Fintechs Are Limited by Borders and Institutions
Banking
Some banks actively participate in money laundering, predatory lending, and misusing customers' funds. They are also insufficiently transparent with their clients and are restricted to offering services to individuals who have sufficient documentation. From 2009 until today in 2024, Bitcoin is accessible by anyone, everywhere, at any time, it is an inclusive system regardless of one's geographic location or personal circumstances, offering exposure to Bitcoin for all. As such, buying and holding Bitcoin on the Bitcoin network means participating in a system accessible to everyone, growing the network for those who cannot access traditional banking services or fintech applications. There are no requirements to open a crypto bank account other than an internet connection. More than two billion people worldwide cannot participate in the current financial system due to their geographical isolation, lack of access to banking infrastructure, and strict documentation requirements, among other reasons. This illustrates the necessity for a new, free-to-use, digital, and borderless method of storing wealth offered by Bitcoin.
Reason 3: Participating is Better than Speculating on The Price of Bitcoin
Bitcoin was designed for people to store and exchange value, not to be an asset to speculate. Holding Bitcoin on the network means participating in a new financial system, one that is based on game theory and cryptographic encryption techniques, among other fields, to create a decentralized peer-to-peer digital cash system instead of trusting a centralized entity to do finance. Purchasing Bitcoin directly, thereby becoming a user of the technology, further legitimizes it, making the network more valuable. To learn more about why bitcoin is valuable check out the Manitoba Blockchain Association blog.
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