The recent introduction of spot Bitcoin ETFs has generated significant buzz and debate. However, one major player in the investment industry, Vanguard, has firmly announced its stance on the matter. With its reputation for putting investors’ interests first, Vanguard has declared that it will not offer spot Bitcoin ETFs or any other crypto-related products on its brokerage platform.
A prudent approach to investment product launch
Vanguard’s decision to abstain from the crypto frenzy is rooted in a rigorous and meticulous process that guides every product launch at the firm. This process involves four crucial screens: investment merit, client needs, competitive advantage, and feasibility. The company carefully assesses whether an investment product possesses enduring merit and caters to its clients’ needs.
In a Q&A session, Janel Jackson, the Global Head of ETF Capital Markets and Broker & Index Relations at Vanguard, affirmed that: “Crypto is more of a speculation than an investment. This is at the root of our decision to not offer crypto products, whether our own or others.”
Vanguard’s approach to innovation does not dismiss blockchain technology, the underlying technology behind cryptocurrencies. The firm recognizes the potential of blockchain to enhance capital markets’ efficiency and actively engages in research to explore its applications beyond the realm of cryptocurrencies.
Investor-first philosophy
Andrew Kadjeski, Head of Brokerage & Investments at Vanguard, emphasizes that Vanguard’s mission revolves around putting the interests of its investor-owners first. The majority of these investors are long-term, buy-and-hold individuals. Vanguard’s structure and product offerings are carefully aligned with this investor profile.
While it might have been tempting to join the rush into crypto-related products, Vanguard remains steadfast in its belief that cryptocurrency is more of a speculation than a legitimate investment.
Vanguard pointed out the extreme volatility of cryptocurrencies, exemplified by Bitcoin’s price swings of up to 150% gains and 77% declines in just three years. However, the double-digit percentage drops in cryptocurrency values are not unusual occurrences. The allure of quick gains often lures investors, but Vanguard’s philosophy centers on helping investors save more, trade less, and maintain a long-term perspective.
It’s important to note that recovering from significant losses in highly volatile assets like cryptocurrencies requires substantial returns, which can lead to impulsive trading behavior. Vanguard’s commitment to reducing trading frequency and promoting a disciplined, long-term approach to investing is at odds with the speculative nature of cryptocurrencies.
Consistency in decision-making
Vanguard’s stance on cryptocurrencies aligns with its historical decision-making philosophy. The company has consistently prioritized its investors’ long-term needs over short-term trends. This commitment is evidenced by past decisions, such as refraining from capitalizing on investment trends like internet funds in the late 1990s.
In 2019, Vanguard made the prudent choice to remove access to leveraged and inverse funds and ETFs, products known for their potential to magnify losses. Similarly, in 2022, the firm discontinued offering most over-the-counter stocks due to their high risk, low liquidity, and susceptibility to fraud.
While Vanguard acknowledges that its decision regarding cryptocurrencies may not be popular with all investors, the company has emphasized its commitment to its mission.
