In January 2024, the Securities and Exchange Commission (SEC) approved several spot Bitcoin exchange-traded funds (ETFs) for trading in a landmark ruling. The ETFs have been the most successful launch in history, amassing over $10 billion in net inflows since launch. Some of the largest asset managers also took part in the ETF launch, with funds from BlackRock (IBIT) and Fidelity Investments (FBTC) hitting equity markets.
But Vanguard, the second-largest asset management company and ETF provider in the world, did not partake. This came as a surprise to some, as the ETFs have presented a huge opportunity for the fund sponsors in terms of profits. Vanguard CEO Tim Buckley commented on the ETFs, giving some clarity as to why Vanguard sat out:
"Something like Bitcoin is just too volatile and it’s not a store of value. It hasn’t been, and it’s very volatile," Vanguard CEO Tim Buckley said about why the company stayed out. "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 also mentioned that Vanguard looks to release ETFs that invest in assets with "underlying cash flow," such as stocks and bonds. According to Buckley, this makes it easier to model future values and provides a stable asset for Vanguard clients' portfolios. To Buckley, Bitcoin offers neither of these, leading Vanguard to avoid offering Bitcoin ETFs.
Vanguard is known to take a more conservative approach to investing, offering highly diversified funds with low fees. Its most popular ETFs are the Vanguard Total Stock Market index ETF (NYSE: VTI) and the Vanguard S&P 500 ETF (NYSE: VOO). Overall, Vanguard's goal is to help clients build long-term portfolios that are positioned to grow in a controlled manner. Based on this, crypto's huge volatility and relative novelty do not align with Vanguard's core competencies.
Vanguard has not ruled out Bitcoin ETFs entirely. Janel Jackson, global head of ETF capital markets, said that "while the discussion about Bitcoin and cryptocurrencies, in general, has increased recently, we do not currently believe that there is an appropriate role for them to play in a long-term portfolio." The key word is "currently," which implies that Vanguard is keeping an eye on the viability of crypto as a long-term investment.
Bitcoin will never meet the prerequisite Buckley described of producing cash flows, but if it continues to grow in both prevalence and use cases, it could move to a point where it deserves a place in the average investment portfolio. This may not happen anytime soon, as Vanguard seems to be hesitant to embrace crypto as a whole.