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November 22, 2023

Bitcoin ETF Fees Could Leave You With Only HALF Your BTC After 34 Years

November 22, 2023

As the allure of the anticipated wave of Bitcoin ETFs continues to captivate investors globally, understanding the costs of Bitcoin ETFs and the benefits of Bitcoin self-custody is crucial for anyone intending to buy Bitcoin. 

Understanding Bitcoin ETFs and Their Fees

Before diving into the complexities of fees and their long-term effects, it’s essential to understand what Bitcoin ETFs are. 

A Bitcoin ETF allows investors to buy shares that represent Bitcoin, offering a way to invest in Bitcoin without having to deal with the challenges of safely buying and securely storing it

However, these conveniences come at a cost, typically in the form of annual fees. These fees can have a significant impact on your investment over time.

The Long-Term Impact of ETF Fees on Bitcoin Investments

Recent analyses and discussions in the Bitcoin community have brought to light a startling revelation: a 1% annual fee, which may seem small initially, can significantly reduce the amount of Bitcoin you’re left with over an extended period. 

For instance, if you start with 1 Bitcoin in an ETF, after 34 years, you might find yourself with only half of your original holding due to these fees. This was demonstrated in an analysis by @Mitesh_Patel shared on X.

Chart comparing costs of bitcoin seld custody with bitcoin etfs by @Mitesh_Patel shared on X.
Chart by @Mitesh_Patel shared on X.


A Comparative Look at Bitcoin Holding Methods

In a 30-year span, an investor who chooses self-custody would retain 100% of their Bitcoin. 

In contrast, the Bitcoin ETF option would see a reduction to about 74%, and an IFA-managed Bitcoin ETF would drop to approximately 55%. 

Fast forward to 40 years, and the difference becomes even starker, with the Bitcoin ETF option you would see a reduction to about 67%, and an IFA-managed Bitcoin ETF would drop to approximately 45%. 

Remember, these calculations assume a 1% fee and this fee will vary depending on the provider of the ETF and the method of funding.

The Opportunity in Direct Bitcoin Purchase

While Bitcoin ETFs offer convenience and create new avenues for institutional players to enter the market, the long-term cost due to fees is significant. 

This brings us to the opportunity inherent in direct Bitcoin purchases. Buying Bitcoin directly, especially through platforms such as Xcoins that offer instant, non-custodial sales, presents a compelling alternative.

Advantages of Direct Bitcoin Purchase

  • No Cumulative Fees: Direct purchase 100% eliminates ongoing management fees.
  • Full Control: You have complete control over your Bitcoin.
  • Reduced Counterparty Risk: No dependence on third parties and financial institutions.

How to Buy Bitcoin Directly

Given the long-term benefits of direct Bitcoin purchases, understanding how to buy Bitcoin is essential. 

Look for platforms that offer instant, non-custodial Bitcoin sales, such as Xcoins. 

These platforms allow you to buy Bitcoin quickly and easily, with full ownership transferred to you immediately.

Steps to Buy Bitcoin:

Why Non-Custodial Bitcoin Sales Matter

Non-custodial Bitcoin sales mean that the platform does not hold your Bitcoin for you. This is crucial for several reasons:

  • Security: Reduces the risk of losing your Bitcoin to platform breaches or fraud.
  • Autonomy: Gives you complete control over your Bitcoin immediately after purchase so you can spend it instantly.
  • Transparency: Ensures a straightforward transaction without hidden fees or complications.

The Future of Bitcoin Investing

While the future of Bitcoin and cryptocurrency markets is always uncertain, one thing remains clear: understanding the implications of different investment methods is crucial. 

With discussions around the possibility of reduced ETF fees in the future, the landscape may change and the costs of investing via ETFs may come down. 

However, the long-term benefits of direct Bitcoin purchases go far beyond the impact of fees and are likely to remain the same.

With Great Power Comes Great Responsibility

Investing in Bitcoin requires careful consideration of various factors, including the method of investment. 

While Bitcoin ETFs offer a convenient way to invest, they come with fees that can significantly reduce your holdings over time. 

Direct, non-custodial Bitcoin purchases present a compelling alternative, offering full control and no ongoing fees. However, be sure to take care of your investment by backing up your private keys and storing them safely away from hackers.

As the world of Bitcoin evolves, staying informed and understanding the nuances of different investment options will be key to maximizing your Bitcoin holdings.

For those looking to invest in Bitcoin, considering the long-term implications of fees and the benefits of direct purchase is essential. 

As we navigate the evolving landscape of cryptocurrency, making informed decisions will be crucial in ensuring the longevity and profitability of your Bitcoin investments.

As always, this article does not constitute financial advice. You should be sure to do your own research and consult a professional financial advisor before making a major investment decision.

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