Outside the ETF frenzy: When done right, holding your own Bitcoin can be just as safe
Since the spot Bitcoin exchange-traded funds, shortly ETFs, broke into the market, all the discussions these days seem to revolve around comparing the newest investment products and the traditional ways of investing in Bitcoin. The necessity to clear up the waters around the perplexing subject is even more pressing as the number of internet users checking the BTC price prediction ceaselessly rises, indicating that sooner or later, reticent enthusiasts leapfrog and familiarize themselves with Bitcoin one way or another.
One of the hyped-up elements of ETFs is the extra layer of security endowed upon the beneficiary since the owner isn’t managing their funds anymore, and the investment company bears more responsibility. Noteworthy, it’s essential to differentiate each investment method, as both have attractive pros but off-putting cons.
Are you ready to discover how to avoid the trap of ETFs and explore Bitcoin the old-school way?
Bitcoin and Bitcoin ETF—which does what?
Spot Bitcoin ETFs mark a tremendous milestone in the cryptocurrency industry. These represent exchange-traded funds that track the leading cryptocurrency’s price in real time and adjust their value accordingly. Each ETF share is tied to a certain amount of BTC, meaning the asset completely supports the fund. These enable fund shares to be developed or exchanged according to market demand changes. As such, they bridge the gap between Bitcoin and investors who find the crypto appealing but not the private keys, digital wallet, exchange account, network transactions, and other elements associated with the old-school way of investing in Bitcoin.
Old stagers have long been using online cryptocurrency exchanges that offer wide selections of digital assets and often manage their users’ investments themselves. This doesn’t mean you’ll entrust your wealth to the exchange company completely, as you have the freedom to decide what you do with your digital holdings after receiving them.
Contrary to what many may believe, investing in Bitcoin through online crypto exchanges doesn’t have to be complicated when you work with the right provider. The whole process often involves:
- Setting up an account.
- Introducing your debit or credit card.
- Sending an order with the amount of Bitcoin you want.
- Seeing it arrive in your wallet.
The USDT you own can quickly be changed for Bitcoin and vice versa.
What’s drawing people to ETFs?
Despite Bitcoin’s longevity on the market, it’s safe to say that misconceptions or misunderstandings still exist. It’s not long since the broader, a-tech audience grasped the digital currency concept that they’re now dealing with a new notion: that of exchange-traded funds based on cryptocurrency.
For conventional investors, exchange-traded funds represent a shortcut into the crypto market through investment firms like VanEck and BitWise. This helps those reticent to technicalities avoid the perplexities brought about by the concept of blockchain and crypto wallet. For instance, you can avoid choosing an online cryptocurrency exchange, a storage method, public and private keys, and so on, opting for the low-maintenance pick. On the other hand, it’s paramount to ask yourself if a greater level of convenience and comfort is enough to dictate who and how your holdings will be managed.
ETFs have just been legalized across the U.S., having existed for a long time in Canada and European countries, among other nations. This means that they’re subject to rigid regulatory scrutiny, representing both a boon and a con that Bitcoin does not. When buying units of the flagship crypt outright, there may not be such straightforward and unitary laws protecting your investment. This feature is what catches starters’ attention these days and pushes ETFs to popularity, although essentially, your underlying investment will still depend on Bitcoin’s price performance.
Could ETFs be suitable for you?
As with every investment, ETFs have their fair share of disadvantages. Investors don’t possess the original asset, which decreases their control over their investment. The investment is under custodial ownership, meaning that a data breach or access restriction could significantly impact the individuals in charge of the ETF.
While pouring money into these funds may be easier, cheaper, and less time-consuming, weighing the pros and cons carefully is essential. Investors pay fees for the investment firm’s management and operational processes, reducing profits over time. These fees come as expense ratios or fares and may sometimes be pricier compared to conventional equity ETFs since these have, in turn, fees to pay.
Bitcoin ETFs are a significant step forward in the crypto industry, providing a streamlined and controlled means to benefit from exposure to the flagship crypto’s price. Nevertheless, investors pay a price for this convenience in the form of management fees. This means you’ll have to do your math attentively.
How can I keep my Bitcoin secure when working with online crypto exchanges?
You need to create a strategy before entering the crypto realm to ensure your holdings are safe and sound. This means that precaution is your best friend, so you should exercise it wherever you go. Don’t go flexing with your crypto investment; never share the passwords with your accounts. Bitcoin’s appeal can draw undesired attention, and personal data disclosed publicly may be pieced together to break codes and access your holdings by ill-intended individuals.
The debate of the year: hot vs. cold wallets
It’s recommended that you manage your BTC possessions through one of the two models of wallet: the hot and cold one. The former is a spending wallet and works like pocket money storage for your usual transactions. This means that you’ll keep just a few in there for ordinary use instead of all of your wealth. For extra convenience, this gets downloaded and managed on the mobile device.
On the flip side, the cold storage wallet represents the best way to manage Bitcoin in the long run since you won’t access it as often as the hot one. This can take the form of hardware, a paper wallet, or a technique known as deep cold storage. They work without the internet, which boosts their security compared to hot storage wallets. Despite being slightly more complex than paper wallets, people find solace in knowing they will fork with avant-garde security features like malware protection and offline signing keys.
Given the recently accumulated knowledge, which means of investing in Bitcoin feels right for you?
