Buying Bitcoin vs Buying Bitcoin ETFs: What is the Difference?

Ruby Layram 5th Feb 2026 No Comments

0shares
0
0
0
0

If you’re thinking about adding Bitcoin to a diversified portfolio, there’s an immediate choice to make.

You can either buy Bitcoin itself through a crypto exchange, or buy a traditional investment product that tracks Bitcoin’s price through your stockbroking account.

While both approaches aim to give you exposure to Bitcoin, they work very differently in practice.

Bitcoin ETFs and the UK: What’s available?

A Bitcoin ETF (exchange-traded fund) is an investment fund that holds Bitcoin and trades on a stock exchange, much like shares in a listed company. Investors buy shares in the fund rather than owning Bitcoin directly.

Spot Bitcoin ETFs were approved in the US in 2024, allowing American investors to gain Bitcoin exposure through mainstream brokerage platforms. However, UK retail investors cannot access these US-listed ETFs due to local regulations.

Instead, UK investors have access to Bitcoin ETPs (exchange-traded products), most commonly structured as exchange-traded notes (ETNs). These products track Bitcoin’s price and trade on UK or European exchanges, but they do not give you ownership of Bitcoin itself.

Buying Bitcoin directly

When you buy Bitcoin from a crypto exchange, you exchange pounds sterling for Bitcoin.

You can keep your Bitcoin on the exchange, move it to a personal wallet, send it to someone else, or use it to pay businesses that accept crypto. If you move it into your own wallet, you control the private keys and therefore the asset itself.

This level of control is one of Bitcoin’s main attractions. However, it also means you are fully responsible for security. If you lose access to your wallet or make a mistake, there is usually no way to recover your funds.

Bitcoin markets run 24 hours a day, every day of the year. You can trade at any time, although prices can move quickly and spreads may widen during periods of high volatility (which means it will be more expensive than usual to trade during these times.).

Buying a Bitcoin ETP

A Bitcoin ETP is a financial product designed to follow the price of Bitcoin. You buy and sell it through a stock exchange, just like shares or funds.

In the UK, these products are typically ETNs. While they are backed by Bitcoin held in custody, you do not own or control that Bitcoin. Instead, you own a security issued by a financial institution.

Bitcoin ETPs are only tradable during stock market hours, usually on weekdays. If Bitcoin’s price moves sharply overnight or over the weekend, you cannot react until the market reopens.

This approach can feel simpler and more familiar for investors who already use stockbroking platforms, but it adds extra layers of risk related to the issuer and custodians.

How the two options compare in practice

Example: Buying Bitcoin directly

You open an account with a crypto exchange such as CoinJar. You will need to verify your identity, and there will be a 24 hour cooling-off period and a knowledge test you need to pass before your account is active. This is required due to local regulations.
You deposit GBP using Faster Payments.
You buy BTC at the current market price.

Your Bitcoin appears in your account. You may later transfer it to a hardware wallet for long-term storage. If you do, you hold the private keys and control the Bitcoin directly.

Example: Buying a Bitcoin ETP

You log in to your existing stockbroking account.
You choose a Bitcoin ETP available to UK retail investors.
You buy, for example, 50 shares during market hours.

The ETP sits alongside your other investments, such as shares or funds. You gain exposure to Bitcoin’s price, but you cannot withdraw or use Bitcoin itself.

Key differences that matter

Ownership and control

With direct Bitcoin ownership, you hold the asset itself. As long as you keep your private keys safe, you are not dependent on a single company to access your funds.

With a Bitcoin ETP, you own a financial product, not Bitcoin. You rely on the issuer and custodians to manage the underlying assets. If the issuer fails, you may be treated as an unsecured creditor.

Neither option benefits from FSCS protection for investment losses.

Trading hours

Bitcoin trades continuously, including nights and weekends.

Bitcoin ETPs only trade when the stock exchange is open. This can limit your ability to react to sudden price moves.

Fees

Buying Bitcoin directly usually involves trading fees, spreads, and sometimes withdrawal fees.

Bitcoin ETPs charge an ongoing management fee, there will also be trading fees and costs for spreads, which gradually reduce returns over time. Your broker may also charge dealing or custody fees.

The cheaper option depends on how often you trade, the broker/exchanges pricing schedules, and how long you plan to hold.

Regulation, ISAs and FSCS protection

Crypto regulation in the UK is still evolving, but two points are especially important.

FSCS protection:
Neither direct Bitcoin holdings nor Bitcoin ETPs are generally covered by the FSCS if things go wrong. If an exchange fails, or an ETP issuer becomes insolvent, you could lose some or all of your investment.
ISAs:
Direct Bitcoin cannot be held inside an individual savings account (ISA). Some Bitcoin ETPs may be eligible, but rules are changing from April 2026, so this area requires careful checking.

In all cases, you should assume there is no safety net.

Read: Can I hold crypto in my ISA?

Risks to be aware of

Risks when owning Bitcoin directly

Losing access to your wallet or recovery phrase
Falling victim to scams or phishing attacks
Exchange failures if you leave funds on a platform
Extreme price volatility

Risks specific to Bitcoin ETPs

Issuer insolvency (counterparty risk)
Custody or operational failures
Prices not perfectly tracking Bitcoin
Shares trading at premiums or discounts
Future regulatory or tax changes

Which option is right for you?

There is no single “best” choice.

Buying Bitcoin directly suits people who want full control, the ability to transact freely, and are comfortable managing their own security.

Bitcoin ETPs may suit investors who prefer traditional investment accounts and want Bitcoin price exposure without handling wallets or private keys.

Whichever route you choose, remember:

Bitcoin is high risk and highly volatile
You should only invest money you can afford to lose
Diversification reduces risk, but does not remove it

Disclosure

Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 minutes to learn more: www.coinjar.com/uk/risk-summary.

Cryptoassets traded on CoinJar UK Limited are largely unregulated in the UK, and you are unable to access the Financial Service Compensation Scheme or the Financial Ombudsman Service.

We use third party banking, safekeeping and payment providers, and the failure of any of these providers could also lead to a loss of your assets. We recommend you obtain financial advice before making a decision to use your credit card to purchase cryptoassets or to invest in cryptoassets. Capital Gains Tax may be payable on profits.

CoinJar’s digital currency exchange services are operated in the UK by CoinJar UK Limited (company number 8905988), registered by the Financial Conduct Authority as a Cryptoasset Exchange Provider and Custodian Wallet Provider in the United Kingdom under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended (Firm Reference No. 928767).

Standard Risk Statement

The above article is not to be read as investment, legal or tax advice and it takes no account of particular personal or market circumstances; all readers should seek independent investment advice before investing in cryptocurrencies. The article is provided for general information and educational purposes only, no responsibility or liability is accepted for any errors of fact or omission expressed therein. Past performance is not a reliable indicator of future results.

UK residents are required (in accordance with local legislation) to complete an appropriateness assessment to show they understand the risks associated with what crypto/investment they are about to buy and enabling CoinJar to categorize them as an investor. New customers are also required under local regulations to wait 24-hours as a “cooling off” period (from account creation), before their account is active (i.e. to deposit, trade, withdraw etc.).

Cryptocurrency is currently not regulated in the UK. It’s vital to understand that once your money is in the crypto ecosystem, there are no rules to protect it, unlike with regular investments. You should not expect to be protected if something goes wrong. So, if you make any crypto-related investments, you’re unlikely to have recourse to the Financial Services Compensation Scheme (FSCS) or the  Financial Ombudsman Service (FOS) if something goes wrong.

Remember:

If you use a credit card to buy cryptocurrency, you would be putting borrowed money at a risk of loss. We recommend you obtain financial advice before making a decision to use your credit card to purchase cryptoassets or to invest in cryptoassets.

Note the standard risk warning from the CoinJar website.

0shares
0
0
0
0

Buying Bitcoin vs Buying Bitcoin ETFs: What is the Difference?

Bitcoin ETFs and the UK: What’s available?

Buying Bitcoin directly

Buying a Bitcoin ETP