Bitcoin is to the iPhone, as Bitcoin ETFs are to the Blackberry

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Bitcoin’s adoption has similarities to the debut of the iPhone. 

Just like the iPhone, Bitcoin and its cryptocurrency entourage are showing the world just the beginning of how programmable coins can be used to fundamentally change the way we interact in life and business.

The iPhone went beyond the basics of calling, texting, emailing, and browsing. It expanded our ability to share videos, photos, access rides, rent a stranger’s vacation home, congregate on social media, pay the babysitter by scanning a QR code, manage our busy schedules, track the kids, book flights, and have groceries delivered to our front door. The list continues into every nook and cranny of life.

Blackberry and Nokia missed the fundamental change in our ability to communicate and access services. They tried to fuse unicorn-wings onto their horse-and-buggy model, while Apple showed the world the benefits of their tech-jet. Instead, Blackberry and Nokia took a “more-of-the-same-only-better” approach, and were crushed in market dominance.

How can more of the same be made better? 

To be better, many in crypto believe an idea must be fundamentally different.

Let’s dive into the five fundamental differences of Bitcoin vs. Bitcoin exchange traded funds (ETFs). The aim here is to expose the pros and cons of both so you can understand the differences and help your clients navigate the crypto waters. Keep in mind that there are other crypto ETFs that provide a range of strategies, including investing in tech companies that support blockchain projects. For this discussion, we’ll focus only on Bitcoin.

According to Statista, assets managed by ETFs globally amounted to approximately 7.74 trillion U.S. dollars in 2020. ETFs have long exhibited stock-like features and benefited investors seeking to diversify their exposure to specific asset classes (stocks, fixed-income, commodities), strategies (growth, value, blend), or sectors (tech, energy, real estate).

If Bitcoin is just another asset, why not just package it into an ETF and tell investors it’s the same as owning Bitcoin?

Simple. Because. It’s. Not. The. Same.

Just as the iPhone was not the same as the Blackberry, they were both mobile devices.

Custody, security, and price action

In October 2021, the ProShares Bitcoin Strategy ETF (BITO) became the first U.S. ETF to provide investors with easy exposure to the price action of Bitcoin futures. The important word here is “futures.” BITO does not directly invest in Bitcoin. Instead, they invest in futures’ contracts traded on the Chicago Mercantile Exchange. This means futures contracts can be in line, above, or beneath the spot price of Bitcoin. 

Currently, the SEC has denied every spot Bitcoin ETF application to date. The rationale is that since Bitcoin is inherently unregulated, it’s safer to offer investors access to Bitcoin returns under regulated futures contracts.

What’s interesting is that Canada approved the Fidelity Advantage Bitcoin ETF in December 2021, which invests directly in Bitcoin. Given time and pressure, a U.S. spot Bitcoin ETF will be approved; the question is when?

With an ETF, investors don’t have to worry about setting up an account with a crypto exchange, wallets, seed phrases, and the Trojan horses of malware and scammers siphoning their assets. It’s a convenient way to get exposure to the forecasted volatility of Bitcoin without actual ownership. Another advantage is that retirement plans are providing access to Bitcoin ETFs inside IRAs and 401Ks, capturing deferred-tax growth.

In contrast, owning Bitcoin has important responsibilities, including setting up a crypto exchange account, setting up one or more digital wallets, protecting the seed phrase, and managing trading of the asset. This setup process makes investing in a Bitcoin ETF even more appealing to investors repelled by the complexity of directly engaging with cryptocurrencies. This is why companies like Block, Shopify, Paypal, and Celsius are working to make onboarding into crypto an easy, safe, and rewarding experience. The upside to going through this setup process is direct ownership and real-time price action (up, down, and sideways), for starters.


The name of the game across all financial markets is fees.

Everyone wants their cut.

The typical Bitcoin ETF’s annual expense ratio can range from 0.50% to 2.5%, in addition to minimum investments that can start at $50,000. Contrast this to owning Bitcoin, there is no minimum investment. Investors can buy $10 or $500,000 worth of Bitcoin.

The fees vary based on the crypto exchange. Most have tiered maker-taker fees depending on the volume of trades, desktop vs mobile app orders, and basic vs pro accounts. Many of these fees start at 1% and decrease based on the above factors.

Coinbase recently launched a beta-version of their Coinbase One service, where they’ll waive all trading fees for a small monthly subscription. A smart marketing tactic to attract users into its exchange. After Bitcoin is purchased, there’s no annual fee for ownership.

However, the next fee to consider is network transaction fees. Any time a cryptocurrency is moved from one wallet/exchange/app to another wallet/exchange/app, there’s always a network transaction fee to pay. Depending on how congested the network is, the fee can range from $1.50 to more than $60 per transaction.

Transaction fees become a factor if an investor wants to move their Bitcoin frequently across multiple wallets, exchanges, and decentralized finance (DeFi) apps.

This is one of the pain points of Ethereum right now. Transaction fees, a.k.a. gas fees, can be more than  $200 per transaction when the network is congested! The battle for lower fees is what fuels competitor chains such as Solana, Luna, and Matic to offer a financially sensible alternative to the crazy high gas fees of Ethereum.


Owning Bitcoin directly opens investors up to the opportunity to use their Bitcoin as collateral for a loan. Loan DeFi apps such as Celsius and Nexo are changing the way investors get access to capital.

When an investor owns Bitcoin, they can borrow against it starting at 0% APR with no origination fees, no credit checks, or monthly repayments. Can you do that with a Bitcoin ETF? Right now, no.

Borrowing does expose investors to liquidation risks if the loan-to-value (LTV) falls out of range. An important consideration when using cryptocurrencies as collateral. The proceeds of the loan also give investors options. They can receive the loan proceeds as a stablecoin, like a USDC or a cryptocurrency such as Ethereum. It’s all a matter of choice and strategy.

Yield opportunities

Owning Bitcoin directly allows investors to engage in DeFi. This includes yield farming, liquidity pools, staking, margin trading, options trading, and lending, for starters. Yields can range from 2% to more than 50% APY, depending on the DeFi app, market conditions, and trading strategy.

This is the soul of DeFi: Building money layers powered by technology. Earning yields on top of yields on top of price action. A feature not available to Bitcoin ETFs. 

It’s important to caution when engaging with DeFi. Investors are exposed to all the risks of cutting-edge technology, including, but not limited to, smart contract risks, project losses, hackers, scam projects, third0party vulnerabilities, and market volatility impacting the DeFi strategy. The increased risks in exchange for rewards may be too steep for many investors to navigate, making a Bitcoin ETF a balanced alternative.

What are your crypto questions?

Now you’re informed of the basic fundamental differences between Bitcoin and Bitcoin ETFs. Time, innovation, and market demand will create users for both. 

Many tax and accounting practitioners, naturally, may have many questions about crypto—including tax treatment and related matters. Ask away! Leave your questions below and I’ll answer them.

Editor’s note: Access the Intuit Tax Pro Center’s full library of crypto-related content.

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