Holding pure bitcoin on your own wallet poses some risk of losing your keys etc. Keeping pure bitcoin on an exchange is actually holding an IOU from the exchange for some bitcoin.
But the risk is the same, it is just transferred to exchange. And while an exchange may have better security than a user, they are also a more attractive attack target for hackers - indeed there were cases where cryptocurrency was stolen from exchanges.
With a bitcoin ETF, you can hold it in your brokerage account and you can buy and sell options on the ETF.
You can do this with actual bitcoin. Same as with oil, gold etc.
You can also hold the ETF in a retirement account to defer or avoid capital gain taxes.
Too volatile, so regulators aren't likely to permit it. Even now none of "speculative" ETFs are available in most 401k trading accounts.