A media analysis of the United States11 showed that only spot bitcoin ETF indicated that the management rates that investors see are only nominal costs. When long-term holdings, tracking errors, trade price differentials and tax processing are combined, the real return gap between products is further widened.

According to the review article, the market is usually more concerned with the ETF net inflows and outflows on a single-day basis, but the more critical issue for ordinary holders is how much of the revenue is ultimately left. The annual fees and tracking deviations continue to accumulate, especially after the holding cycle has been extended.

Ten years of cost gap widened.

Using the $100,000 holdout as an example, five and 10 years were measured for more than one available bitcoin ETF in the United States, assuming the price of bitcoin remained unchanged.

According to the data in the text, the annual fee for the lowest set of products is approximately 0.15 to 0.20 per cent, and the cumulative cost for the year is roughly between $1489 and 1982. The rate for IBIT under the Beled flag is 0.25 per cent, with a cumulative cost of approximately $2472 for 10 years.

In contrast, the greyscale GTTC still charges 1.5% of the annual fee. According to the article, the cumulative cost of the same $100,000 held for 10 years was approximately $141 million, more than $1.16 million above IBIT.

If bitcoin prices continue to rise, the cost drag will further increase. For example, under the annualized 15 per cent increase, the cumulative cost of IBIT 10 is close to US$ 10,000, while GBTC can rise to about US$ 5.38 million.

Tracking errors are hidden costs.

According to the article, management fees are not the only figures to look at. The deviation between ETF and the spot performance of Bitcoin also erodes the return of investors.

The tracking error refers to the difference between the actual ETF proceeds and the target asset. In theory, an ETF with an annual fee of 0.25 per cent should increase only 0.25 per cent per year over bitcoin. In reality, however, foreclosure processes, cash positions, hosting time points and bottom-up trade price differentials tend to widen or narrow deviations.

According to the text, 11 in the United States only available bitcoin ETFs have an annual tracking error of between 0.03% and 0.42%. IBIT and FBTC are more liquid, and some of the smaller funds are more off-the-shelf.

For example, an ETF management fee of 0.20 per cent, but a tracking error of 0.42 per cent, the actual annualized cost rises to 0.62 per cent, significantly above the apparent rate.

This also means that the product with the lowest nominal rates is not necessarily the least cost. It is argued that if there are higher tracking errors in low-cost funds, the final real return may be less than a slightly higher rate, but more stable.

There are trade-offs between hosting and ETF

The article also compares ETF with directly holding bitcoin. Management fees are not required on an ongoing basis for self-custody, and hardware wallets usually require only one-time expenses ranging from $79 to $219.

However, self-custody is accompanied by loss of private keys, operational errors and more complex tax declarations. ETF is more accessible by placing hosting, declaration and account access within the traditional voucher system.

According to the article, when comparing ETF with direct currency holding, investors should not only look at the schedule of rates, but should also consider the age of holding, product liquidity, ability to track and their own tolerance for hosting risks.