Making Sense Of Vanguard's BTC ETF Position

Vanguard has taken a principled stance against the bitcoin ETFs, but it hasn't won them any friends in the crypto space.

Will Vanguard change its course following extensive criticism?

As bitcoin spot ETFs launch to enormous hype, some providers are taking a stance against them. Vanguard, one of two major brokerage platforms in the US (the other being BlackRock), has drawn the anger of the crypto community by preventing its customers from accessing any of the new ETFs.

Vanguard platform screenshot
Vanguard does not allow its customers to buy BTC spot ETFs.

Vanguard has made it clear that it is not within its investment philosophy to allow clients to buy and sell bitcoin. Its stance is that BTC is an asset like gold, that has no revenue flows, and that can be volatile. Vanguard's website states:

Buying gold, silver, platinum, or other precious metals is sometimes touted as a way to hedge the risks of more traditional investments. However, the prices of these metals can be extremely unpredictable and volatile.
Trading in commodities and futures is very specialized and not available through Vanguard.

Vanguard's CEO has said that bitcoin is like gold, and Vanguard does not "steer" clients to gold. As it happens, though, it's possible to buy gold through Vanguard's platform in the form of the GLD ETF.

Top Microstrategy Holder

What's more, Vanguard itself is one of the top holders of MSFT shares, which are, of course, backed by bitcoin thanks to CEO Michael Saylor's aggressive purchases over the past three years.

Vanguard is additionally a holder of bitcoin mining stocks. However, following the launch of the spot BTC ETFs and subsequent controversy, Vanguard has doubled down and prevented customers from buying the BITO BTC futures ETF, which was previously available on their platform. Customers are able to sell any GBTC they hold, back from the days before it was converted to an ETF, but not buy it.

Spot bitcoin ETFs will not be available for purchase on the Vanguard platform. We also have no plans to offer Vanguard bitcoin ETFs or other crypto-related products. Our perspective is that these products do not align with our offer focused on asset classes such as equities, bonds, and cash, which Vanguard views as the building blocks of a well-balanced, long-term investment portfolio.

No Returns

Eric Balchunas, a popular Bloomberg ETF analyst who has extensively covered the bitcoin ETFs, has a different point of view. He argues that Vanguard's stance of avoiding BTC ETFs but investing in Microstrategy is perfectly in line with their investment philosophy, because it's earnings that are important. Jack Bogle, founder of the Vanguard Group, disliked speculation, preferring assets with a return, like stocks and bonds. For that reason, he avoided commodities.

Balchunas continues:

And to be fair Bogle bashed stock trading more than commodities btw, but tried to separate Investment Returns from Speculative Returns as a way to get ppl to understand why you should inv/not trade in stocks as well as keep your cool when things get really good or really bad.

Ultimately, though, it's about revenues, and Vanguard is quickly finding out that making a stance by not offering certain products is losing them more customers and revenues that it is gaining them. For that reason alone, it's bad business. Can we expect a retraction and a change of heart in the near future?

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