In a surprising move for a firm that has long been critical of cryptocurrency, Vanguard Group has opened its doors to spot Bitcoin exchange-traded funds (ETFs) on its platform, catering to its vast client base of 50 million. This shift comes at a time when the $12 trillion asset manager is re-examining its stance on digital assets, despite previous calls from its executives that Bitcoin and similar cryptocurrencies are largely speculative.
During his recent address at Bloomberg’s ETFs in Depth conference in New York, Vanguard’s global head of quantitative equity, John Ameriks, drew a colorful analogy, likening Bitcoin to a “digital Labubu”— a reference to a trendy plush collectible toy that has garnered significant attention on social media. According to Ameriks, Bitcoin’s lack of essential investment qualities, like income generation and consistent cash flow, reinforces its speculative status rather than positioning it as a viable long-term asset.
Currently trading around $90,000, Bitcoin had previously peaked at $126,000 in October, indicating its volatile nature. Ameriks reiterated Vanguard’s cautious outlook, emphasizing that the firm believes Bitcoin lacks the necessary attributes for proper long-term investing.
The decision to allow crypto ETFs marks a significant policy change for Vanguard, which has spent considerable time monitoring the performance of cryptocurrency funds since spot Bitcoin products began launching in early January 2024. The company has opened trade access to regulated ETFs from well-known rivals like BlackRock and Fidelity, but has firmly stated that it will not launch its own crypto ETFs or provide guidance on digital asset investments.
Client Discretion Key to Crypto Trading
Andrew Kadjeski, who leads brokerage and investments at Vanguard, commented on the recent platform changes, noting that the performance of crypto ETFs has managed to meet expectations during market volatility, along with maintaining liquidity. However, he stressed that clients will bear the responsibility for making their own investment choices regarding cryptocurrencies.
“We allow people to hold and buy these ETFs on our platform if they wish to do so, but they do so with discretion,” Ameriks stated.
While some clients expressed frustration at Vanguard’s previous restrictions on crypto products, threatening to move their accounts, the firm has classified crypto funds as “non-core” assets—similar to gold. Despite this limited embrace, Vanguard remains hopeful about the implications of blockchain technology, even as it remains critical of cryptocurrencies as worthier investments.
Leadership changes have played a crucial role in this pivot; Salim Ramji, Vanguard’s new CEO, has a history with cryptocurrency, having previously overseen BlackRock’s ETF operations, including the launch of their Bitcoin product. Under Ramji’s guidance, the firm has begun to recognize the client demand for greater access to crypto products.
In contrast to Vanguard’s cautious approach, BlackRock’s iShares Bitcoin Trust has proven immensely popular, achieving $70 billion in assets in record time and generating substantial annual revenues. This discovery has set BlackRock apart in the booming space of cryptocurrency funds.
Potential Value Amid Speculation
Ameriks believes Bitcoin could offer unique value under certain economic conditions, such as periods of high inflation or political unrest. However, he maintains that the relatively short history of Bitcoin makes it difficult to draw definitive conclusions about its investment viability.
“If you can see reliable movement in the price in those circumstances, we can talk more sensibly about what the investment thesis might be,” Ameriks explained.
As 66% of U.S. investors perceive cryptocurrencies as highly risky, according to FINRA Foundation data, the sentiment towards Bitcoin remains mixed. Nevertheless, Vanguard holds roughly $11 trillion in assets under management, maintaining its position as a significant player in the financial market.
In summary, while Vanguard’s recent policy shift signifies a willingness to engage with the evolving landscape of crypto investments, its executives continue to advise caution, emphasizing the speculative nature of digital assets while also recognizing the potential opportunities they may offer.
