Fees, Taxes, and Custody: Weighing Direct Bitcoin Ownership vs the Fidelity Wise Origin Bitcoin Fund

Investors considering whether to buy Bitcoin directly or through a Bitcoin ETF need to understand the fees, taxes, and custody rules associated with each option. The Fidelity Wise Origin Bitcoin Fund (FBTC), one of the largest Bitcoin ETFs, has an expense ratio of 0.25% per year, meaning that for a $10,000 investment, you'd pay $25 annually in fees. Over two decades, this could add up to about $490 at a consistent price.

On the other hand, buying Bitcoin directly comes with no ongoing yearly fees, only trading fees on the exchange and a network fee when moving coins to your personal wallet. If you choose to invest in a hardware wallet for extra security, that is typically a one-time cost of around $100.

The ETF also provides easier tax reporting, as holders receive a Form 1099-B that outlines the proceeds from sales and their cost basis. In contrast, holding Bitcoin directly usually requires the use of a specific crypto IRA provider, limiting your options for retirement accounts like IRAs or 401(k)s.