Will spot Bitcoin ETFs be cheaper than crypto exchanges to purchase BTC? Will spot Bitcoin ETFs be cheaper than crypto exchanges to purchase BTC?
Balchunas speculates on Bitcoin ETFs as potential cost rivals to crypto exchanges, igniting debate over fee sustainability and securities lending.
3 min read
Updated: Jan. 8, 2024 at 6:25 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Bloomberg analyst Eric Balchunas posited whether crypto exchanges would be forced to revisit their pricing structures should a spot Bitcoin ETF be approved, given the seemingly low fees charged by some of the most prominent players.
However, regarding the issuers offering lower fees, Caitlin Long of digital asset custody platform Custodia Bank raised concerns that low ETF fees could indicate problems for issuers regarding covering costs. While seemingly a direct competitor for Custodia, Long warned that ETF issuers who offer fees that are not high enough to cover their costs may resort to lending securities to offset losses.
According to the filed prospectuses of the ETF applicants, Bitcoin in custody will not be being lent in such a manner but instead held in cold storage. However, it is possible for ETF shares to be lent out with collateral backing the transaction.
We analyzed some of the top crypto exchanges to compare how low these fees are. The chart below shows the transaction fees for some of the most popular crypto platforms for traders making a market order with no promotional benefits such as staking, holding native tokens, or high trading volume.
| Exchange | Trading Fees | $100 | $200 | $2000 |
|---|---|---|---|---|
| Kraken | 0.26% | $0.26 | $0.52 | $5.20 |
| Coinbase | 0.60% | $0.60 | $1.20 | $12.00 |
| Crypto.com | 0.075% | $0.075 | $0.15 | $1.50 |
| Gemini | $0.99, 1.49% for >$199 | $0.99 | $2.98 | $29.80 |
| Cash App | 3%, 1.75% for >$199, 1.25% for >$1999 | $3.00 | $3.50 | $25.00 |
| Binance | 0.1% | $0.10 | $0.20 | $2.00 |
The chart below shows the cost of holding the equivalent values of Bitcoin for 1 year within the proposed Bitcoin ETFs currently awaiting approval.
| ETF Issuer | Fees (bps) | $100 | $200 | $2000 |
|---|---|---|---|---|
| Invesco / Galaxy | 59 bps | $0.59 | $1.18 | $11.80 |
| Blackrock | 30 bps | $0.30 | $0.60 | $6.00 |
| Bitwise | 24 bps | $0.24 | $0.48 | $4.80 |
| Ark | 25 bps | $0.25 | $0.50 | $5.00 |
| Fidelity | 39 bps | $0.39 | $0.78 | $7.80 |
| Valkyrie | 80 bps | $0.80 | $1.60 | $16.00 |
| Grayscale | 150 bps | $1.50 | $3.00 | $30.00 |
| WisdomTree | 50 bps | $0.50 | $1.00 | $10.00 |
| VanEck | 25 bps | $0.25 | $0.50 | $5.00 |
It is worth noting that to acquire any shares in the above Bitcoin ETFs, users must use a broker to make the purchase. Some brokers charge fees for custodying shares, while others charge no fees. For instance, exchanges such as Webull, eToro, and Robinhood offer zero-commission trading. In contrast, others such as Hargreaves Lansdown, BestInvest, Interactive Investor, and ig.com charge a fixed fee for U.S. ETF purchases, with some offering zero commission after a set number of fees.
This analysis will assume zero-commission trading for the proposed spot Bitcoin ETFs.
Taking this into account, it would appear that crypto.com is the cheapest exchange to purchase Bitcoin, coming at just $1.50 for a $2,000 purchase compared with the lowest ETF fee of $4.80 if held for 1 year.
However, several of the crypto exchanges above also charge withdrawal fees. Crypto.com has a 0.0006 BTC withdrawal fee of $27 as of press time. The current average network fee on Bitcoin is 0.0002 ($9.45.) Other exchanges, such as Binance, only charge the network withdrawal fee.
The chart below shows the cost to purchase and withdraw the respective amounts of Bitcoin to self-custodial using the average transaction fee as of press time.
| Exchange | Trading Fees | $100 | $200 | $2000 | Withdrawal Fees |
|---|---|---|---|---|---|
| Kraken | 0.26% | $18.26 | $18.52 | $23.20 | $18 |
| Coinbase | 0.60% | $10.45 | $10.65 | $21.45 | Network fee |
| Crypto.com | 0.075% | $27.07 | $27.15 | $28.50 | $27 |
| Gemini | $0.99 or 1.49% for >$200 | $10.44 | $12.43 | $39.30 | Network fee |
| Cash App | 3% or 1.75% for >$200 or 1.25% for >$1999 | $12.45 | $12.95 | $34.45 | Network fee |
| Binance | 0.1% | $9.55 | $9.75 | $9.75 | Network fee |
However, there is a critical difference between buying Bitcoin through an ETF or exchange. With a spot Bitcoin ETF, you would be exposed to the underlying Bitcoin, which is essentially custodied for you through the issuer and its Bitcoin custodian (for most cases, Coinbase Custody.) However, when you exit the ETF, you can do so only in cash, not in Bitcoin. That Bitcoin is held in custody for you only while you hold the shares of the ETF.
With a crypto exchange, you are again purchasing Bitcoin, which is held in custody by a third party. Yet, you can then either withdraw the Bitcoin directly to a self-custody wallet or convert it into FIAT and withdraw in cash. The difference in custody, however, is potentially significant. Should the spot Bitcoin ETFs be approved, they have come under much closer and more direct regulatory scrutiny than many crypto exchanges. The FTX debacle of 2022 highlighted how important knowing where your crypto is custodied can be.
Therefore, as of press time, of the examined services, Binance is the cheapest exchange with which to purchase Bitcoin and withdraw into self-custody. Bitwise is the cheapest ETF to buy and hold custodied Bitcoin through an exchange-traded product, and crypto.com is the cheapest crypto exchange to purchase and custody Bitcoin without withdrawal.
The top providers to purchase Bitcoin and have it held in custody on your behalf are crypto.com, Binance, Bitwise, and Ark/VanEck.
It is also important to remember that this analysis is based on a single purchase using an account with no special privileges or volume bonuses. Many exchanges offer discounts on fees for active traders, thus reducing the cost of buying and holding Bitcoin.
Mentioned in this article
Bitcoin 
Coinbase 
Binance 
BlackRock 
Ark Invest 
Gemini 
VanEck 
Bitwise 
Fidelity Investments 
Crypto.com 
Kraken 
Eric Balchunas Posted In: Bitcoin, Binance, BlackRock, Coinbase, Crypto.com, Gemini, Grayscale, Kraken, US, Analysis, ETF, Exchanges
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Liam 'Akiba' Wright
Also known as "Akiba," Liam is a reporter, editor and podcast producer at CryptoSlate. He believes that decentralized technology has the potential to make widespread positive change.
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In this article
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Coinbase
Coinbase is a digital currency exchange and wallet service that allows individuals to buy, sell, and store digital currencies, such as Bitcoin, Ethereum, and Litecoin.
Binance
Binance is a global cryptocurrency exchange that provides a platform for trading more than 100 cryptocurrencies.
BlackRock
BlackRock, synonymous with global asset management, is an American multinational investment management corporation based in New York City.
Ark Invest
ARK Investment Management LLC (ARK Invest) holds a precision lens on thematic investing.
Gemini
Gemini is a regulated digital asset exchange and custodian that allows customers to buy, sell, store, and stake digital assets in a regulated, secure, and compliant manner.
VanEck
VanEck is a global investment manager with offices around the world, including New York, Australia, China, Germany, Netherlands and Switzerland.
Bitwise
Bitwise Asset Management pioneered the first cryptocurrency index fund and is the leading provider of rules-based exposure to the cryptoasset space..
Fidelity Investments
Fidelity Investments Inc., commonly referred to as Fidelity, is a multinational financial services corporation based in Boston, Massachusetts.
Crypto.com
Crypto.com was founded in 2016 on a simple belief: it’s a basic human right for everyone to control their money, data and identity.
Kraken
Kraken is a San Francisco-based digital asset exchange in euro volume and liquidity that trades various currencies, including Canadian dollars, US dollars, British pounds, and Japanese yen.
Eric Balchunas is an American author, ETF analyst, and Senior ETF Analyst at Bloomberg Intelligence.
