A recent post by @Mitesh_Patel has started a big discussion on X about the pros and cons of holding your own Bitcoin versus putting your money into a spot Bitcoin ETF.
The post includes a detailed spreadsheet that compares these two methods over 30 and 40 years, providing useful information for people thinking about buying Bitcoin.
Mitesh Patel's post analyzes how Bitcoin performs in three situations: when you hold it yourself, when you invest in a Bitcoin ETF with a 1% fee, and when an Individual Financial Advisor (IFA) manages a retirement account with a 1% fee using a Bitcoin ETF.
The spreadsheet is a helpful tool that shows how these fees can impact your overall returns over time.
Spreadsheet Highlights:
- Year 0: Starting with 1 Bitcoin (BTC) in all three situations.
- Year 30: Self-custody keeps all of the original Bitcoin, the ETF holds onto 73.97%, and the IFA-managed account keeps 54.55%.
- Year 40: Self-custody still has 100% of the original Bitcoin, while the ETF holds onto 66.90%, and the IFA-managed account keeps 44.57%.
The post received comments and reactions from the Bitcoin community, with different opinions on the data. One person asked about the accuracy of a 1% fee for the Bitcoin ETF, while others mentioned the possibility of lower fees in the future.
However, most of the commenters believe that holding your Bitcoin yourself gives you the best chance for higher returns and reduces the risk of relying on others.
Insights from Bitcoiners
Bitcoiners shared their thoughts, leading to some considerations:
- Taxes: Holding Bitcoin in a Roth IRA ETF could offer tax benefits, especially in the long run. Commenters discussed the advantages of tax-free withdrawals from Roth IRAs in retirement compared to paying capital gains taxes on personally held Bitcoin.
- Counterparty Risk: While ETFs are easy to use, some worry about the risk of depending on others and government interference. Self-custody is seen as a way to reduce these risks.
- ETF Fee Competition: Some people mentioned that the costs of ETFs are likely to decrease over time, making them more competitive with self-custody.
- Importance of Education: The discussion emphasized the importance of educating oneself about self-custody, including understanding the risks and rewards involved.
- Government Regulations: Some mentioned potential risks of self-custody, like government regulations and the chance of having assets taken away while others stated the difficulty in implementing regulations to confiscate Bitcoin.
@w_s_bitcoin (A.K.A Wicked) chimed in stating that many will see ETFs as a starting point before taking full control of their Bitcoin.
The X discussion started by Patel's spreadsheet analysis provides useful information for people thinking about looking into Bitcoin. While the advantages of self-custody, like full control and potential for more profits, are clear, the conversation highlights the importance of tax considerations, self-custody, and staying informed.