How this instrument works
This sheet runs the same starting stake through two different ownership structures and shows what a small annual cost difference does to the ending balance. Both paths assume the identical BTC appreciation rate — only the yearly cost subtracted from that rate differs, isolating the fee itself as the entire source of the gap between Value held via a spot ETF and Value held via direct custody.
The math treats each annual cost as a constant drag netted straight out of the assumed growth rate before compounding, once per year for the full holding period — the same shape a management fee takes when expressed as an expense ratio and deducted from a fund's net asset value over time. A custody or exchange fee rarely compounds in exactly this smooth a way in practice; some custodians charge flat annual fees, others charge per transaction, so treating it as a percentage drag is an approximation, not a quote from any specific provider.
Left out entirely: taxes on eventual sale, trading spreads and commissions on either route, the ETF's own tracking difference from the spot price, and the very different risk each path carries — counterparty and custodian risk for a fund, versus the risk of losing your own private keys for direct custody. The Direct-custody advantage figure is a fee comparison under one growth assumption, not a verdict on which way of holding bitcoin is better.
- Enter the stake in Amount invested, $ — this is the starting capital run through both ownership paths.
- Set Holding period, years and Assumed BTC appreciation, % per year — the same growth assumption applies to both routes.
- Enter the fund's stated cost in ETF annual expense ratio, % and your own arrangement's cost in Direct custody/exchange fee, % per year.
- Compare Value held via a spot ETF against Value held via direct custody, then read Direct-custody advantage for the exact dollar gap.
Worked example — $10,000 at a 30% assumed CAGR
Put $10,000 into the sheet with a 5-year Holding period and a 30% Assumed BTC appreciation. Route it through a spot ETF charging a 0.25% ETF annual expense ratio and the balance compounds to a Value held via a spot ETF of $36,773.66 by year five — the fee quietly turns a 30% assumed return into an effective 29.75% every year it applies.
Run the identical $10,000 through direct custody at a 0.1% Direct custody/exchange fee instead and Value held via direct custody reaches $36,986.71 — a Direct-custody advantage of $213.06. That whole gap comes from a 0.15 percentage-point difference in annual cost compounding for five years on money growing at 30% a year; halve the holding period or the stake and the dollar gap shrinks by roughly the same proportion, even though neither fee percentage changed.
Questions
Why does a 0.15% fee gap turn into $213 over just five years?
Because each fee is subtracted from the growth rate every year, not charged once — a small percentage-point gap compounds alongside a 30% assumed return for five years and grows into real dollars on a $10,000 stake. Stretch the holding period or raise the amount invested and the same fee gap produces a larger dollar difference, since it is compounding on top of compounding.
Will the ETF always come out cheaper if its expense ratio looks low?
Not on its own — it depends on which of the two annual costs is smaller. Raise ETF annual expense ratio, % above Direct custody/exchange fee, % per year and Value held via a spot ETF falls behind Value held via direct custody in the readout. The sheet only compares two stated percentages; it says nothing about which route is more convenient or secure to hold.
What is the direct custody/exchange fee meant to represent?
It stands in for whatever it costs to hold bitcoin outside a fund wrapper — a custodial wallet's annual charge, an exchange's ongoing custody fee, or the amortized cost of cold-storage insurance and hardware. Fully self-managed keys can push that figure close to zero, but enter whatever annual percentage actually matches your arrangement.
Why does the same appreciation rate apply to both ownership routes?
A spot ETF is built to track the price of bitcoin itself, so the underlying asset should move the same way regardless of which route holds it. The only input meant to differ between the two paths is the annual drag — the expense ratio on one side, the custody or exchange fee on the other — which is exactly what this sheet isolates.
Does the calculation include the ETF's tracking difference from spot price?
No. A real fund can drift a little from perfect spot tracking through trading costs and the timing of its net asset value calculation, on top of its stated expense ratio. This sheet only models the published expense ratio as a constant annual cost; a fund's realized tracking difference can run higher or lower than that number in practice.
Does this account for taxes when either position is eventually sold?
No, taxes are excluded entirely. Capital-gains treatment can differ between ETF shares and directly held bitcoin depending on jurisdiction and how long each is held, and that difference can matter more than either annual fee shown here. Check the tax treatment for each route on its own before comparing after-tax outcomes.
References
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.