Bitcoin ETF vs buying Bitcoin: Which builds more wealth?

The choice that confuses new investors

Since Bitcoin ETFs launched in January 2024, a new question has emerged: should you buy a Bitcoin ETF or buy Bitcoin directly?

On the surface, they seem similar. Both give you exposure to Bitcoin's price. Both let you invest without dealing with complex wallets or private keys.

But underneath, they work very differently — and those differences matter when you're trying to build long-term wealth.

This guide breaks down what each option actually gives you, what you can do with them, and which approach aligns better with different investment goals.

What is a Bitcoin ETF?

A Bitcoin ETF (Exchange-Traded Fund) is a financial product that tracks Bitcoin's price without requiring you to own the actual cryptocurrency.

When you buy shares of a Bitcoin ETF, you're buying shares in a fund that holds Bitcoin, rather than possessing the bitcoins themselves in a wallet. The fund custodian — typically a large financial institution — manages the actual Bitcoin, and you own shares that represent a portion of that holding.

Bitcoin ETFs trade on traditional stock exchanges and are subject to standard market hours, typically Monday to Friday from 9:30 a.m. to 4 p.m., except on public holidays. You can buy them through your brokerage account, just like stocks.

Why ETFs exist: They make Bitcoin accessible to people who want price exposure without the technical steps of setting up a crypto wallet, managing private keys, or choosing a cryptocurrency platform.

For many traditional investors, especially those with retirement accounts, ETFs provide a familiar structure.

What does buying Bitcoin directly mean?

When you buy Bitcoin directly, you own the actual cryptocurrency.

You purchase Bitcoin on a crypto platform or exchange, and it gets added into your account. From there, you can hold it, move it, trade it, or use it however you want.

Unlike an ETF, where a fund manager holds the Bitcoin on your behalf, direct ownership means the Bitcoin is yours. You're not holding a financial instrument that represents Bitcoin; you're holding Bitcoin itself.

The cryptocurrency market operates 24 hours a day, seven days per week, meaning you can trade Bitcoin at any time from anywhere.

This ownership model unlocks possibilities that ETFs simply can't offer.

The key difference: What you can actually do

This is where the comparison gets interesting.

Bitcoin ETFs and direct Bitcoin ownership might both track the same price, but what you can do with each is completely different.

What Bitcoin ETFs let you do

Buy and sell during market hours — ETFs trade on traditional stock exchanges during standard market hours, so you can enter or exit positions Monday through Friday, 9:30 AM to 4:00 PM Eastern.

Hold in retirement accounts — Many people use ETFs because they can include them in IRAs or 401(k)s, which typically don't support direct crypto holdings.

Avoid technical setup — You don't need to learn about wallets, private keys, or crypto platforms. Your brokerage handles everything.

Borrow against ETF shares (limited) — Since 2025, major banks like JPMorgan have begun accepting Bitcoin ETF shares as loan collateral, particularly for institutional and high-net-worth clients. However, this service is limited and works through traditional banking channels.

What buying Bitcoin directly lets you do

When you own actual Bitcoin, you unlock capabilities that ETFs can't match:

Earn daily interest — With Nexo, rates on Bitcoin reach up to 6.25% annually, depending on your Loyalty Tier.

Borrow against your Bitcoin — Use your BTC as collateral to access stablecoins without selling. Rates start from 1.9% on Nexo, depending on your Loyalty Tier and loan-to-value ratio. This lets you unlock liquidity while keeping your Bitcoin exposure intact.

Spend your Bitcoin — Use crypto cards like the Nexo Card to make your Bitcoin into everyday spending power. You can pay for purchases in Credit Mode (borrowing against your BTC) or Debit Mode (spending directly).

Trade 24/7 — Bitcoin markets never close, meaning trades occur around the clock. You can buy, sell, or swap Bitcoin at any time, unlike ETFs, which are limited to stock market hours.

Transfer and move freely — Send Bitcoin anywhere in the world without intermediaries.

Use advanced trading tools — Access Futures, margin trading, Target Price Swaps, and other instruments designed specifically for crypto markets.

This is the core difference. ETFs give you price exposure. Direct Bitcoin ownership gives you price exposure plus utility.

Fees

Here's another important distinction: cost structure.

Bitcoin ETFs charge annual management fees, typically ranging from 0.19% to 0.30% for major funds like BlackRock's IBIT and Fidelity's FBTC, which both charge 0.25%.

When you own Bitcoin directly on cryptocurrency exchanges, usually there are no annual management fees.

Tax considerations

Both Bitcoin ETFs and direct Bitcoin purchases can trigger taxable events, but they work differently.

When you sell ETF shares, you realize capital gains or losses based on the share price movement. This is straightforward and familiar to anyone who's traded stocks.

When you sell Bitcoin, you also realize capital gains or losses. However, borrowing against your Bitcoin typically doesn't trigger a taxable event in many jurisdictions, since you're not selling — you're using it as collateral.

Important: Tax rules vary by country and individual circumstances. Consult a tax professional for advice specific to your situation.

When Bitcoin ETFs make more sense

ETFs aren't the wrong choice for everyone. They make sense in specific situations:

You want to hold Bitcoin in a retirement account — Many 401(k)s and IRAs support ETFs, but not direct crypto. If tax-advantaged retirement investing is your priority, ETFs might be your only option.

You prefer absolute simplicity — If you don't want to learn about crypto platforms, wallets, or new interfaces, ETFs let you invest through your existing brokerage account.

You're only interested in price exposure — If you have no interest in earning yield, borrowing, or using Bitcoin functionally, an ETF gives you price tracking with minimal effort.

You're an institutional investor — Many pension funds and insurers cannot directly buy Bitcoin, but can invest in regulated ETFs.

For these use cases, ETFs serve a clear purpose.

When buying Bitcoin directly makes more sense

Direct Bitcoin ownership is the better choice if:

You want your assets to work for you — Earning interest, borrowing with crypto-optimized terms, and using advanced trading tools all require actual Bitcoin.

You value liquidity and flexibility — Bitcoin trades 24/7, responds to market moves instantly, and can be transferred or used globally.

You want lower costs — Avoiding annual management fees and potentially earning interest instead makes direct ownership more cost-effective over the long term.

If any of these resonate, owning Bitcoin directly aligns better with your goals.

Frequently asked questions

1. What is a Bitcoin ETF?

A Bitcoin ETF is a fund that holds Bitcoin and trades on traditional stock exchanges. When you buy ETF shares, you gain exposure to Bitcoin's price without owning the cryptocurrency directly.

2. Is it better to buy Bitcoin or a Bitcoin ETF?

It depends on your goals. Bitcoin ETFs are simpler and work with retirement accounts. Buying Bitcoin directly lets you earn interest, borrow against it, and use it functionally.

3. Do Bitcoin ETFs actually hold Bitcoin?

Yes, spot Bitcoin ETFs hold actual Bitcoin. The fund custodian manages the cryptocurrency, and your ETF shares represent a claim on that Bitcoin.

4. What are the fees for Bitcoin ETFs?

Bitcoin ETFs typically charge annual management fees ranging from 0.19% to 0.30%, with major funds like BlackRock's IBIT and Fidelity's FBTC charging 0.25%. These fees reduce your returns over time.

5. Can you borrow against a Bitcoin ETF?

Yes. Since 2025, major banks like JPMorgan have begun accepting Bitcoin ETF shares as loan collateral, particularly for institutional and high-net-worth clients. However, this works through traditional banking channels with conventional loan terms.

6. Can I hold Bitcoin ETFs in my IRA or 401(k)?

Yes, many retirement accounts support Bitcoin ETFs. This is one of their main advantages for investors focused on tax-advantaged retirement investing.

7. Do Bitcoin ETFs trade 24/7 like Bitcoin?

No. Bitcoin ETFs are traded on traditional stock exchanges and are subject to standard market hours, while Bitcoin itself trades 24/7 on cryptocurrency exchanges.

These materials are accessible globally, and the availability of this information does not constitute access to the services described, which services may not be available in certain jurisdictions. These materials are for general information purposes only and not intended as financial, legal, tax, or investment advice, offer, solicitation, recommendation, or endorsement to use any of the Nexo Services and are not personalized or in any way tailored to reflect particular investment objectives, financial situation, or needs. Digital assets are subject to a high degree of risk, including but not limited to volatile market price dynamics, regulatory changes, and technological advancements. The past performance of digital assets is not a reliable indicator of future results. Digital assets are not money or legal tender, are not backed by the government or by a central bank, and most do not have any underlying assets, revenue stream, or other source of value. Independent judgment based on personal circumstances should be exercised, and consultation with a qualified professional is recommended before making any decision.