Explaining The Benefits Of Bitcoin ETFs Over Self-Custody

Let’s be honest: the future of money can be a bit complex and even a little confusing. Even the story of Bitcoin’s creator sounds more like something from a sci-fi flick than the foundation of a financial venture. But that doesn’t diminish the incredible potential that Bitcoin offers.

The biggest bottlenecks to widespread adoption are related to the asset’s volatility but also due to the intricacies of blockchain technology. Investing in cryptocurrencies typically has involved directly owning and being responsible for the custody of digital assets.

However, as Bitcoin gains wider acceptance with mainstream and institutional investors, new ways to gain exposure to BTC are being introduced. Here are some of the many benefits investing in a Bitcoin ETF offers over self-custody.

What makes Bitcoin different?

Bitcoin is an incredible breakthrough technology that allows individuals to essentially be their own bank and transact with other individuals or businesses, all without a trusted third-party intermediary like a bank, credit card processor, or otherwise.

The idea is that without banks, users and individuals gain more control over their assets. But more control comes with much more responsibility. If a hacker or thief gains access to a credit or debit card, the intermediary will refund your money and go after the culprits responsible for you. With crypto, there is no third party to back you up.

Being your own bank is hard

bitcoin benefits fidelity

Although horror stories do exist that focus solely on hacks or other types of loss, the worst possible kinds to read are those related to forgotten passphrases and private keys. Cryptocurrencies like Bitcoin have both a public and private key. The public key acts as the address users can send to and from, while the private key is essentially the cryptographic password.

Early Bitcoin users often with massive amounts of BTC have sadly forgotten or misplaced hand-written passphrases and private keys, resulting in millions of dollars worth of BTC locked away and potentially lost forever. This is like losing your keys to your house or car and never again being able to get back in. Even top crypto executives that know better have reportedly lost tens of thousands of BTC this way.

Remove self-custody risk with a Bitcoin ETF

With all that risk related to simply owning and holding bitcoin, why would anyone consider owning it? The first recorded price per BTC is as low as under a penny. Today, each coin is worth around $40,000, and its highest recorded price was over $68,000. With ROI well over a million percent since its debut more than a decade ago, it is one of the most lucrative assets in the history of finance.

Angel investors compare owning BTC to owning a piece of the internet in the 90s. Institutional investors view it as a way to diversify their traditional portfolios and hedge against inflation. Retail investors see it as the next big thing in money. But what are these investors to do to avoid the risk associated with self-custody? The answer is in Bitcoin-based ETFs and mutual funds.

Enter the Bitcoin ETF: The answer to accessibility

An ETF is an exchange-traded fund, which means that a trusted entity like Fidelity is taking on the risk associated with custodying crypto assets, allowing investors to gain exposure to the underlying asset in a much safer manner, right through their traditional brokerage accounts.

For example, the Fidelity Advantage Bitcoin ETF (FBTC) relies on the same institutional-grade foundation Fidelity offers to all clients and gives investors a way to access Bitcoin exposure from a trusted brand. In addition to the added comfort, convenience, and safety provided by a Bitcoin ETF, it eliminates the need to tinker with blockchain-based crypto wallets and any intricacies related to cryptocurrency cold storage.

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