When I buy crypto on Kraken or Coinbase, I feel like I instantly lose 2–3% the moment the trade goes through because of the spread (and that’s not even including the fee). Like I’ll buy $100 worth of BTC or SOL and it’s immediately showing ~$97–$98. That might not sound huge, but it feels brutal when you think about doing that repeatedly over time.
Because of that, I’ve been thinking: why wouldn’t I just buy a crypto ETF instead, especially inside my Roth IRA?
From my perspective, the ETF route seems cleaner and cheaper:
• The spread seems basically negligible compared to what I’m seeing on retail crypto apps
• The ETF expense ratio is around 0.2% per year (or in that ballpark), which feels tiny compared to losing 2–3% on entry and then again on exit
• In a Roth IRA, I don’t have to worry about taxes on gains (as long as I follow withdrawal rules)
• I’m not trying to day trade or trade after-hours anyway
• I’m mostly thinking long-term hold / DCA for years, not flipping short-term
So… what am I missing?
Everyone online constantly says “buy the actual coin” and “not your keys, not your crypto,” which I get. But from a pure cost perspective, it seems like actually buying and selling the coin through Kraken/Coinbase (at least the way I’m doing it) is way more expensive than people admit. If I’m paying 2–3% spread each time plus fees, that’s a big headwind, especially if you ever rebalance or add in chunks.
Is it just that I’m using the wrong product (like Coinbase vs Coinbase Advanced, Kraken vs Kraken Pro, market orders vs limit orders)? Or are ETFs missing something important that makes the “no spread + Roth IRA” angle not as good as it sounds?
I’d really appreciate any insight from people who’ve done both. Are the spreads I’m seeing normal? Do you just accept them? Or is the ETF-in-Roth strategy actually the simplest move for someone who wants long-term exposure without constantly bleeding 2–3%?
Let me know what you think.
Posted by warrior178
12 Comments
You need to ask yourself what you’re doing and what your goal is. You will not be unable to use your ETF as currency.
Ownership is the difference. Also when using kraken pro the fees aren’t that crazy. And if you swap larger sums they offer even better terms
Real token in case you need to flee to a non extradition country. ETF for investing. Best to have both.
On a tax adjusted basis, an efficient ETH digital asset treasury company will perform better. The ETF will only be able to stake about 50% of their ETH while the DAT can stake it all and get a lower tax rate on the staking rewards. Not to mention they may unlock additional yield though leverage or other defi lending
I do both. Do you use limit orders? I don’t notice a spread at all when buying off Gemini with limit orders.
And you should be using Coinbase Advanced.
If you want to benefit from price movements an ETF is fine and has some advantages. Just remember that the ETF isn’t directly correlated to the price of its underlying asset and can’t be redeemed for it.
Those spreads do seem pretty high though. You tend to get better value for money from an open exchange rather than basic buy / sell.
Eric Balchunas, the ETF analyst at Bloomberg, calls ETFs the terrordome for fees and spreads. As an asset class they’ve been driving these as close to zero as possible for decades. Coinbase et. al. are in for a rude awakening as more people figure out exactly the fact you’ve expressed. Their entire business model of taking in 2-3% is toast.
It’s only a matter of time before in-kind redemptions become a thing. I say buy the ETF and one day withdraw straight to Bitcoin.
Not your keys…
That spread pain is real on retail apps.
Most people avoid it by using advanced/pro trading + limit orders
It can def. be the better option. Self custody has lost coins for thousands and there can also be tax reasons for not holding crypto directly.
Crypto is boom or bust. That 3% is a drop in the bucket to what you’ll end up making or losing.
When you buy shares in the ETF, you own a piece of the fund …… not the actual crypto coins. I would just use a dex. ETF’S also have continuous fees.