- Despite their surge in popularity, Vanguard has shunned Bitcoin ETFs, citing volatility and a lack of value.
- Vanguard has faced client pressure for Bitcoin exposure but has prioritized stability over speculation.
- Vanguard has remained open to changing its stance if Bitcoin’s asset class transforms.
Investment giant Vanguard has reaffirmed its opposition to offering spot Bitcoin exchange-traded funds (ETFs), despite a surge in popularity for these new financial instruments. This decision comes amid the recent approval of several spot Bitcoin ETFs by the US Securities and Exchange Commission (SEC) in January 2024.
Why Vanguard Says No to Bitcoin ETFs
Vanguard’s CEO Tim Buckley and Chief Investment Officer Greg Davis explained the company’s stance in a video message. They highlighted the high number of inquiries they’ve received regarding potential Bitcoin ETF offerings. This is unsurprising given Vanguard’s position as the world’s second-largest asset manager and its well-known skepticism toward cryptocurrency.
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Following the SEC’s historic approval of spot Bitcoin ETFs, Vanguard joined investment firms like Merrill Lynch to deny their clients access to these products. This decision attracted criticism from some customers and industry figures.
"Something like Bitcoin is just too volatile and it's not a store of value," Buckley stated. "It hasn't been and it's very volatile. When stocks got hammered in the recent crisis, Bitcoin went right with them. And so it is speculative. Really tough to think about how it belongs in a long-term portfolio."
Buckley justified Vanguard’s position by characterizing Bitcoin as a speculative asset unsuitable for long-term investment strategies, which are core to the company’s philosophy. He pointed to Bitcoin’s price volatility, particularly its tendency to follow stock market downturns.
Vanguard Prefers Stocks and Bonds
Vanguard prioritizes investments with “underlying cash flow,” such as stocks and bonds, which Bitcoin currently lacks. Buckley emphasized that the company would only reconsider its stance if Bitcoin’s asset class undergoes significant changes.
While Vanguard remains cautious, other asset managers embrace spot Bitcoin ETFs to cater to wider client needs. San Diego-based Cetera recently announced the addition of four such ETFs to its investment options. Patient Capital, a firm with $1.8 billion in assets, even petitioned the SEC to convert up to 15% of its holdings into Bitcoin ETFs.
On the Flipside
- Vanguard’s decision could cause them to miss out on a growing market segment for cryptocurrency-interested investors.
- By not offering spot Bitcoin ETFs, Vanguard cedes ground to competitors who cater to this demand.
Why This Matters
The cryptocurrency community sees These developments as positive signs, as the launch of spot Bitcoin ETFs was anticipated to increase institutional investment in Bitcoin. So far, these ETFs have performed well, attracting a net flow of $11.95 billion over the past two months.
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To learn more about the recent retirement of Vanguard’s CEO and its impact on the company’s decision to launch Bitcoin ETFs, read here:
Does Vanguard Regret Not Launching a Bitcoin ETF?
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