Investments
January 24, 2024
The recent introduction of spot bitcoin ETFs has been generating headlines and buzz in pockets of the industry. However, Vanguard does not have plans to create a Vanguard bitcoin ETF or other crypto-related products. Additionally, such products from other issuers will not be offered on our brokerage platform. In this Q&A, two Vanguard leaders—Janel Jackson, global head of ETF Capital Markets and Broker & Index Relations, and Andrew Kadjeski, head of Brokerage & Investments—discuss why.
Are there any plans to launch a Vanguard Bitcoin ETF?
Jackson: No, given the current state of crypto as an asset class, Vanguard does not have plans to launch its own bitcoin ETF or any crypto-related products. When deciding what investment products to offer, we consider a range of factors, including whether we believe they have enduring investment merit and meet our clients’ needs. 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 portfolios.
A rigorous process guides every Vanguard product launch
We do have a lot of interest in blockchain, the technology behind cryptocurrencies. We believe its application to a number of other uses besides crypto will make capital markets more efficient, and we’ve been actively involved in research to use blockchain technology.
Why is Vanguard not offering crypto-related products on its brokerage platform?1
Kadjeski: Investors have a lot of choices these days when it comes to where to save for their retirement, invest for their kids’ education, and hold their emergency savings. Investors who come directly to Vanguard do so because they know we put their interests first—and that is reflected in what products and services we do and don’t have on the shelf.
The easy step for us would have been just to allow full access to crypto-related products. But as a firm and a brokerage platform, we’re purposely structured to meet the needs of our investor-owners, most of whom are long-term, buy-and-hold investors.2
Jackson: In Vanguard’s view, 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. With equities, you own a share of a company that produces goods or services, and many also pay dividends. With bonds, you get a stream of interest payments. Commodities are real assets that meet consumption needs, have inflation-hedging properties, and can play a role in certain portfolios. While crypto has been classified as a commodity, it’s an immature asset class that has little history, no inherent economic value, no cash flow, and can create havoc within a portfolio.
Morningstar recently published a perceptive article pointing out that even a modest 5% allocation to bitcoin in an otherwise traditional balanced portfolio can drastically raise its risk profile.3 This is driven, in large part, by bitcoin’s extreme volatility.
Kadjeski: Over just the past three years, the price of bitcoin has increased by as much as 150% and declined by as much as 77%. Double-digit percent price drops are routine among cryptocurrencies. Remember that you need a 100% return just to make up for a 50% decline. And the more volatile an asset, the more tempting it is to trade. At Vanguard, our products and services are designed with the goal to help investors save more, trade less, and take a long-term approach—not chase trends and churn their portfolios.
Has Vanguard made similar decisions in the past?
Jackson: There have been several investment trends in the past—the internet funds in the late 1990s for example—that Vanguard could have capitalized on. But we always ask ourselves, “Does this meet our investors’ long-term needs?” In hindsight, in nearly all cases, I believe we made the right call, ultimately benefiting our clients.
Kadjeski: The same line of thinking applies to our brokerage platform. In 2019, we decided to remove access to leveraged and inverse funds and ETFs. These products are often misunderstood and misused by investors and can magnify losses. Similarly, in 2022, we stopped offering most over-the-counter stocks, which are prone to high risk, low liquidity, and potential fraud.
Jackson: We understand that our decision on crypto is not popular among some investors, but many know that we’re being consistent with our philosophy and past practice.4 Our mission statement to give investors the best chance for investment success isn’t just a saying for us. It’s built into our DNA and we’re staying true to our mission by making this decision.
1 Vanguard brokerage clients who already have crypto products can still keep or sell those investments, but they can no longer make new purchases.
2 Vanguard is owned by its funds, which are owned by Vanguard’s fund shareholder clients.
3 Stephen Margaria, “Is Even a Little Bitcoin Too Much for Your Portfolio?” Morningstar website, January 18, 2024.
4 John Rekenthaler, “Vanguard Got Bitcoin Right,” Morningstar website, January 17, 2024.
Related links:
- New year, timeless investing principles (article, issued January 2024)
- Digital currencies: No substitute for stocks, bonds (article, issued March 2021)
Notes:
For more information about Vanguard funds and ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.
Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
All investing is subject to risk, including the possible loss of the money you invest.
Investments in bonds are subject to interest rate, credit, and inflation risk.
