Topic: What's the difference between Coinbase and an ETF? (Read 335 times)

appealing to investors who don't want to hold their own coins, which I get it, to an extent. An investor may want to gain capital appreciation from Bitcoin long-term, without worrying about losing access to their keys. It's been also said that ETFs are convenient in terms of regulation.

Before Bitcoin, legislation is what protected your property. Examples following.

• If you buy a car, and a thief steals it, you have all the papers to prove it belongs to you.
• A thief can't just steal your house, because it's yours on paper.
• You can't have your company stolen.

This "mechanism" attracts investors. An investor won't buy a million dollars worth of gold, to keep it to their basement. Instead, they would buy a promise of that gold, because in the end, all they want is the capital appreciation, not the gold per se. The real gold is guarded and kept on secure vaults, inside banks. A thief can't just steal that gold.

How certain can investors be for the security of a Bitcoin ETF? What's the difference between that, and a centralized exchange? Both are supposed to safeguard their setups, yet we frequently notice centralized exchanges suffering from cyberattacks, resulting in clients' funds being stolen.
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And who's saving the commercial bank, or at least its deposits, when it goes bankrupt? Taxpayers. Commercial banks can't print the pile of cash you want to insure out of nothing, but the state can guarantee you that in case of the bank going out of business, they can cover your losses, and even if it doesn't have the money to do that (worst case scenario), it can either print it, or borrow it in exchange for bonds.

I think this is the big difference between ETF and simply storing it in your Coinbase account. In the former, in the worst case scenario your bitcoin is insured. If their partners (e.g., Coinbase) are hacked, you'll be refunded in fiat currency.

I can trade in and out of an ETF with basically no cost and fast within my larger portfolio.

I'm not a fan of exchanges for the same reasons everyone else is, but Coinbase seems to be used/trusted by some major players. But I am sure those custody eaccounts have allot more legalize surrounding them.

If you can put your money in hands of others and believe that they will do the right things, go ahead.

If you can not do this, you can simply learn about Bitcoin, wallets, setup, backup, recovery and learn more about security for your time on Internet, for your devices and you can secure your Bitcoin wallets and keep your bitcoins safely by yourself. It's much better than trusting someone, some entities.

Exchanges and companies can be more professional than you but they can do either right things or shady things. There are many layers of protection to prevent shit happens with Bitcoin Spot ETFs but just like many industries, there are ways to exploit and shit can kick off a black swan event anytime.

Enron: Scandal and Accounting fraud. It's an example.
FTX is another example and it's in cryptocurrency industry.

To be honest, I live in a country where people rarely knew what ETF was but thanks to the marketing of local banks, now many people knowand use it. For investors, ETF is really a nice addition. For example, my local bank offers me the ability to buy and sell ETFs from my mobile and internet bank, with a few clicks. In seconds I can move my funds in ETFs and opposite. After the ETF approval, I have the ability to buy and sell Bitcoin with my bank account within minutes. Till ETF approval, I had to deposit my money on an exchange, buy Bitcoin, trade, convert Bitcoin to USD and then withdraw. Now I can do it inside my bank account. This is definitely very comfortable. Because of ETFs and the ability to trade them via local internet and mobile bank, a lot of people got introduced to Bitcoin and this is one of the positive sides of ETFs that we can't deny. But on the other hand, it's taking over it and losing its purpose of being your own bank. Too much centralization to be honest.

Well, I guess not no difference since an ETF makes it so you can buy into "Bitcoin" with an ordinary brokerage account. But it's just a more convenient way of doing the same thing.

It makes no sense but you can technically insure it, and you can have your bank insure the pile of cash in your safe locker inside the bank, it's a pain in the ass for the compliance, you pay the box and insurance and you don't get interest but it can be done theoretically.


Yup, pretty much.


Commercial and private banks can't print money, and that's why commercial banks go bankrupt as they have done it a hundred times already in history, the only one that can print money is the CB and a CB is not taking deposits, the limit you have insured under the different scheme is how much money they can afford to pay if printing would have been that easy you wouldn't have had any bank run or bank collapse in history, right?

ETF may be suitable for person if capital gains is the only that he wants. However, people who cares about adoption and idea should always buy real btc instead

Correct, I just wanted to mention an example of a big money heist, which in today's value would be about the same orders of magnitude as the BlackRock bitcoin reserves.

But, if Coinbase goes bankrupt or hacked, you don't have fund insurance, as with the ETF. I think that's the big difference between the two. Buying bitcoin in Coinbase (and leaving it there) is the equivalent of buying Coinbase IOUs, where in the ETF, you're buying a Coinbase IOU, but if Coinbase goes bankrupt, you're covered by insurance.

If there's practically no difference, then why did people demand ETF like that? We have bitcoin IOU since the beginning. It probably has to do with insurance. A person might want to save in bitcoin, but not like the process of entrusting these savings to an entity with no insurance. They'd rather have the option of insuring their deposit, similarly as to bank's deposits.

Bitcoin is a meme(coin)? Interesting take.

I'm pretty sure a banker wouldn't like it to be a dentist...

It's much better to be able to be the sole issuer of money (unlike dentists who don't have a monopoly in their profession). You print a piece of paper that in reality is worth 10 cents and you claim it's worth $100 or even €500 or 1000 CHF. Then people are forced to enter the rat race and never escape.

I don't know if it's a conspiracy or not, but I'm pretty sure 80% of human beings are deeply insecure to trust themselves, therefore bankers (and the state) fill the niche of providing "security".

There is some debate about the advent of civilization and whether it really benefitted us.

Homo Sapiens started as a decentralized species (hunter gatherers/tribes of 150 people) that is slowly leaning towards centralization (urbanization).

It's not just CEX and mining pools that promote centralization... forming cities/armies/governments 10k years ago was the start of centralization.

I understand why people did it, you gain so much power compared to small tribes of hunter gatherers. Same for mining pools vs solo miners.

From the standpoint of the average consumer, there is no difference. It's just a different way of betting on the Bitcoin meme, which is all most people actually want to do with Bitcoin.

As for why consumers want this, I've discussed this before in the Anon Paradox: consumers want to keep their "big" money someplace... safe--even if they would like to keep their "small money" someplace anonymous.

In other words:

• Most people don't want to hide their life savings in a mattress.
• Most people don't want to put their retirement savings inside of their iPhone where they can simply lose it in a landfill.
• Most people would be afraid somebody might physically steal it from them if they kept their own savings or major holdings on their person.
• Most people don't want to build a mini version of Fort Knox in their spare bedroom.
• Most people don't like the idea of having something in their house that others might kill for.

Because of this, most people use an amazing invention of civilization called, "specialization". In other words, you work all of your life to be a great dentist, and somebody else focuses their life's efforts on, say, keeping your money safe.

That's why we have banks and other financial institutions. It's not a government conspiracy, it's just a product that consumers want and need.

And Coinbase and the ETF are really just variants of the same product.

The obvious difference between holding Bitcoin on Coinbase and owning shares of the ETF is that the exchange traded funds have a management fee attached to them whereas holding your coins on Coinbase is free...

Then there's also the need to secure a Coinbase username/password as opposed to buying an ETF in your traditional brokerage account.  Your brokerage account also might allow for shorting or options trading (I don't think options are live on the ETFs yet) or even tax free gains if it's inside a Roth IRA.  Each has their own benefits and drawbacks, but if you're investing a lot of money over a long time frame and not using a retirement account, using Coinbase and avoiding that management fee is probably the way to go.

This either means he cannot spend them (for reasons I mentioned above) or he's probably dead/lost the keys (same speculation about Satoshi's coins).

Someone could even send them to a burn address, but who would do that? Maybe for trolling purposes, who knows.

Most thieves steal money to become rich (high risk -> jail, high reward -> luxurious life), otherwise there is not much point in the first place. Why risk it if there's no reward?

pension funds cannot invest in bitcoin direct(until 2025 when banks can self custody bitcoin(research BIS)). however for now they can invest in ETF's/stocks/shares. and with laws allowing ETF means pension funds can invest in the price exposure of bitcoin without holding the actual bitcoin
this means people offsetting part of their salary into a pension they can get bitcoin price exposure pre-tax and then when selling the price exposure at their retirement age they can claim the gains tax free too

some naive many people dont care about the security of the coin itself as they believe that these companies that custodianise the coins are insured. so they think they are still due/owed 'real money' of equal amount to the price exposure or exchange rate no matter if the custodian loses the underlying assets

but what happens(and smart people know) is the share price tanks to 'pennies on the dollar' in such events of the custodian unable to cover the losses. so people then take the risk of the chances of such events occurring vs the possible gains over time

which is where people then think about all the gains of tax free discount at purchase of etf and tax free bonus at withdrawal of money. vs risk of custodian being hacked. which some people decide to not pension invest and instead take salary as normal post-tax and then buy real bitcoin and withdraw bitcoin to own private key for security taking the hit on the tax, just to not be in a custodians custody.. which some people also risk assess their own home set-up of securing their own keys from loss. to then assess the risks of self storing bitcoin risk of loss vs the pro-cons of pension investing into bitcoin price exposure of an etf

Then, Bitcoin is more of an asset than a currency. You wouldn't ever insure a big pile of cash. You would just add them to your bank account, and this would convert them from an asset to a liability for both you and the bank (since it'd loan it afterwards). But, Bitcoin cannot turn into a liability for everyone, someone always have to have it as an asset; be it you, or Coinbase.

Isn't that correct?

The way I understand it is: of course you can ensure my deposit. You can literally print it in the worst case scenario. You can't print a bitcoin, and that makes me wondering what happens in that case.

Mt.Gox hacker funds are still unspent: https://mempool.space/address/1FeexV6bAHb8ybZjqQMjJrcCrHGW9sb6uF. If the hacker is a good one, I doubt they'll find him.

It won't be lost, they'll use chain analysis to find out where the funds went.

Even if someone wanted to use a DEX to exchange stolen BTC for XMR, then there's not enough liquidity for 100k BTC.

It would be the heist of the century perhaps, but you wouldn't be able to do much with it (I don't mean daily expenses, but purchasing a big house, Lambo -> all these stuff require KYC).

It is the global reserve currency in 2024.

Will it still be the global reserve currency in 2034?

Nobody can say it for sure...

Non-US investors don't have access to BlackRock's ETF or any other US ETF.

Your right in your observations that they seems almost the same but the truth is one they are level of security for the two. One is higher than the other.

The ETFs seems more secured than and individual having bitcoin in his or her account because I would call an exchange account a wallet. The reasons why the ETF is more secured is because is that they do not store this coins in an exchange, it must be in a very much secured wallet which either doesn't have one signature, so it will be hard for the coins to get hijacked in any way.

Apart from this I don't think reason why the ETFs will seems more safer than having ones coin in an exchange.

One is the investment itself while the other one is a platform.

You can not compare etfs to centralized exchanges because the former is exactly what is being bought and sold by itself already meanwhile centralized exchanges are just where investors come and go to do their transactions. They do not serve the same purpose.
Typically etfs are considered safer innterms if hacking as they rely on heavily towards banks. Centralized exchanges are also kind of banks but in crypto so I suggest to pick just one or the other.

ETFs are not insured under FDIC like bank deposits, but that doesn't mean they can't be insured, just like a car or a cargo ship is not FDIC insured you can still have private insurance for it, it all depends on the investment fund, the custodian and the agreement between them. It's the value of the ETF shares that can't be insured, not the goods behind it.



Coinbase is the largest custodian, they have held close to 1 million coins with no problem for years, not only have they not been hacked but also nobody has still managed to track of their holding addresses. Same for Bitgo which until one month ago was the custodian for all of Salvador coins and half of Microstraegy coins are held by Fidelity with an undisclosed amount on Coinbase again.


But receiving the cash value is how insurance works everywhere, you don't insure your 3 yo BMW with 50k km and in case of total damage, you get the same car with the same mileage, same for houses, painting, and any other assets, what you have insured is the value, not the actual assets.
As for not relying on other currencies, why not, the USD is the global reserve currency, and you can still have your deposit insured even if you're not in the US!

Coinbase is the custodian of many Bitcoin Spot ETFs, not only BlackRock.

• https://blockworks.co/bitcoin-etf
• It has information on custodian of Bitcoin Spot ETFs.

Generally we don't want to see such high centralization towards Coinbase from Bitcoin Spot ETFs.

OK, that's what I thought. This is a problem, because if Bitcoin becomes the global reserve currency or asset, then we can't rely on other currencies or assets to insure it. At the moment, if 100,000 BTC are lost, they can pay $6B on paper and that's it. They can't buy what they can't insure, so even if they have $20T, they can't use half of it to buy bitcoin.

Am I wrong anywhere?

I get it, I'm just thinking what happens in a scenario where these people get ripped off by a hacker. It has happened before, just not with BlackRock.

You're comparing apples to oranges.

Trading incurs a one-time fee, while ETFs charge you a yearly fee for merely keeping your assets (no CEX does that).

It's even worse when you're not even allowed to withdraw BTC, so you're forced to keep it there.

So every year BlackRock (or even worse Grayscale) take a certain amount of satoshis from you.

Most investors don't mind it though, because they measure their wealth in USD, not BTC.

The only difference is that Coinbase allows you to withdraw BTC to a personal wallet, while ETFs only allow you to withdraw USD. That's why Grayscale ETF holders have to convert to USD first and then send those dollars to BlackRock to buy BTC ETF.

It's quite tedious in a sense, but for people who don't intend to ever use a BTC wallet it sounds rather convenient.

Besides that, the ETF marketing makes it more appealing to institutional investors. These folks treat BTC ownership like they treat home/car ownership (they don't mind custodians keeping their property titles). In general I'd say they blindly trust the Military - Industrial complex (the state and multinational corporations/Mega Corps).

Reputable exchanges have Proof of Reserves these days. That wasn't a thing before the FTX meltdown.

Also, with the crackdown on mixers a thief will have a hard time to launder stolen BTC... assuming that someone can find a mixer with a huge anonymity set, which is highly unlikely.

What worries me about BTC ETF is that they'll try to turn it into CBDC.

BlackRock will attach ESG variables into it, whether it's carbon credits and/or social credit score.

If you're Bill Gates or Klaus Schwab, that shouldn't worry you (for obvious reasons).

But what if you're an Average Joe ETF investor?

What if AI catches you "misgendering" (that's just one example of "hate speech") someone on social media and that gives the necessary power to BlackRock to legally confiscate your BTC ETF share?

What I'm trying to say is that you shouldn't worry about ordinary thieves. You should worry more about legalized thieves wearing suits, if you get my drift...

Even banksters won't steal you like an ordinary thief would do. They have legal ways to steal your wealth and there's nothing you can do about it (apart from not using these institutions).

I sincerely hope I'm wrong, even though I'm not an ETF investor. But what if I'm right?

Do you honestly expect no-coiners/woke/SJWs to criticize BlackRock for their dubious business practices? Rest assured they won't. They will support TechnoCommunism with a passion.

Again: I hope I'm wrong, but feel free to bookmark my post for future reference.

The biggest difference is the level of regulation
ETFs are more regulated by the government and SEC than CEX like Coinbase
Many investors believe anything under the government is safer than a private enterprise.
Another reason I can think of is the fee
I think some ETF collect fee as low as 0.1% to 0.25% not including Grayscale and this fee is smaller than Coinbase trading fee.
Besides there are companies that wouldn't want or are held back in buying bitcoin
But they can option to buying shares from companies that do.

they aware of the risk but buying ETFs seems fairer to them
It's a stock and SEC and the government will protect them(Lol) in case of a breach in Coinbase. If anything so happen I think they should be an insurance fund set aside for unprecedented situations.


-An alt account of Ambatman

ETFs are not moved but completely stored somehow safe. It is good for multisig and cold storage together which can be more layers of protection if done well than Coinbase that their customers can decide to withdraw their coins at anytime. I am not saying that the storage will be better for ETFs but it will likely be better because the coins remain not moved unlike Coinbase that still have to move some coins. Because of how exchanges are and customers moving money is the reason exchanges make use of hot wallet but which is not needed at all for ETFs. I have not gone deeper into ETF because I do not like it at all than for more bitcoin adoption but I think if I want to set up an exchange or bitcoin ETF, I see the bitcoin holding safer with bitcoin ETF.

This is not good at all. I did not know it is like this. I am using my knowledge to discuss it before. If they have it with Coinbase, I see no difference. But Coinbase may agree with Blackrock to hold the coins on cold storage with multisig. Bitcoin for ETFs should be very easy to protect.

The main thing would be that BR is too big and not that dependent on the crypto business to let their customer bleed for a mistake by their partner, if Coinbase (their custodian) goes down they have enough in insurance and additional funds to cover the losses, if Binance is hacked and drained for all their coins they have zero funds with which to cover the loss despite all that safu bs.


Coinbase is the custodian for Blackrock.

Regarding how confident investors are in their Bitcoin entrusted to them, it is not much different when they invest under the protection of the institution that provides the service. They have been investing long before Bitcoin, and still provide proven security and guarantees. So offering an ETF is the same step as placing confidence that Bitcoin is as safe as other assets.
If we look at crime and risk, there is almost no difference. Several times centralized exchanges have been attacked and the assets in them have also been drained. In banking, we have also heard of certain banks being attacked by a group of criminals like in the movies. But all of this has strong collateral at stake by third parties. There's a lot of accountability, so it's just a matter of trust that's been built over time.

Not an expert in ETF, what I found is ETFs aren't insured, this same to centralized exchange. But when the company fails, the shareholders can still receive the money that they invested, even though not in full amount.

So when it comes to getting cyberattack, there's no difference with centralized exchange. It just depend on the company whether they willing to return the money or not.

My understanding is that in ETFs, the safety of funds is ensured. When investors invest in ETFs, they are assured that their funds are secure. Investing in the S&P 500 offers certainty, providing assurance that investments are secure. The same principle applies to gold or real estate investments. It's reasonable because these assets can be confidently secured (some even just on paper, see S&P 500). However, with Bitcoin, only the knowledge of a number can swiftly move those funds. And the difference with the previous assets, is that the thief can be anonymous, or doesn't risk their physical well-beingness as a gold thief would.

Bitcoin ETF has bitcoins in reserves. These bitcoins may be stored either inside a fund, or a centralized exchange, doesn't make much difference. The only difference I can think of, is that Coinbase holds its clients' coins in a hot wallet, where the ETF's bitcoins are stored in a cold storage.

My question is essentially, what difference does it make to make an agreement with Coinbase to hold your bitcoins in their cold storage, than buying an ETF? An ETF can't provide more "funds safety" than a Coinbase cold storage. How is the ETF more significant than that?

The ETFs are more secure than the bitcoin on centralized platforms like Coinbase because they can only be traded on the centralized exchanges, unlike bitcoin on Coinbase that can be moved to a noncustodial wallet address by a scammer or a hacker which can not be freezed by the central authorities like the exchanges.

But the reason I do not like bitcoin ETF is because it is not bitcoin itself. I will prefer to hold bitcoin instead. I mean the coins that is fully controlled by my own private keys and not those centralized platforms private keys or ETFs.

There is no certainty for their fund safety if they don't go self-custodial by themselves.

It's not their private keys, it's not their bitcoin.

Reminder: do not keep your money in online accounts

With Bitcoin Spot ETFs, investors take different risks from the company that launch Bitcoin Spot ETF shares, to the custodian entity that is Coinbase. They never know what will happen with either the Bitcoin Spot ETF company or the custodian entity like Coinbase.

The main argument of the ETF is that it makes it more appealing to investors who don't want to hold their own coins, which I get it, to an extent. An investor may want to gain capital appreciation from Bitcoin long-term, without worrying about losing access to their keys. It's been also said that ETFs are convenient in terms of regulation.

Before Bitcoin, legislation is what protected your property. Examples following.

• If you buy a car, and a thief steals it, you have all the papers to prove it belongs to you.
• A thief can't just steal your house, because it's yours on paper.
• You can't have your company stolen.

This "mechanism" attracts investors. An investor won't buy a million dollars worth of gold, to keep it to their basement. Instead, they would buy a promise of that gold, because in the end, all they want is the capital appreciation, not the gold per se. The real gold is guarded and kept on secure vaults, inside banks. A thief can't just steal that gold.

How certain can investors be for the security of a Bitcoin ETF? What's the difference between that, and a centralized exchange? Both are supposed to safeguard their setups, yet we frequently notice centralized exchanges suffering from cyberattacks, resulting in clients' funds being stolen.