In a significant judgment, the SEC approved several spot Bitcoin ETFs for trading in January 2024. Over $10 billion in net inflows since launch have made the ETFs the most successful launch ever. BlackRock (IBIT) and Fidelity Investments (FBTC) ETFs impacted equities markets.
Vanguard, the second-largest asset manager and ETF provider, did not participate. This surprised some because ETFs provide fund sponsors significant profit potential. Vanguard CEO Tim Buckley explained why Vanguard waited out on ETFs:
Bitcoin is excessively volatile and not a store of value. Not yet, and very volatile "Vanguard CEO Tim Buckley explained why the company stayed out. Bitcoin followed markets down during the recent crisis. It's hypothetical. Hard to see how it fits in a long-term portfolio."
Buckley said Vanguard plans to offer ETFs that invest in "underlying cash flow," including stocks and bonds. Buckley says this makes future value modeling easy and gives Vanguard clients a solid asset. Buckley believes Bitcoin lacks these, hence Vanguard does not provide Bitcoin ETFs.
With minimal fees and broadly diversified funds, Vanguard is known for its conservative investment. Top ETFs are Vanguard Total Stock Market index (NYSE:VTI) and Vanguard S&P 500 (NYSE:VOO). Vanguard helps clients develop long-term, controlled-growth portfolios. Crypto's volatility and novelty don't fit Vanguard's strengths.
Bitcoin ETFs are still possible for Vanguard. Janel Jackson, global head of ETF capital markets, said "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 long-term portfolio." Key word "currently," indicating Vanguard is monitoring crypto's long-term investment potential.
Bitcoin won't produce cash flows like Buckley's, but if it grows in popularity and use cases, it could fit in the average investment portfolio. Vanguard is reticent to embrace crypto, so this may not happen soon.
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