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Analysts predict shift in Vanguard’s stance on spot Bitcoin ETF

Following the recent U.S. Securities and Exchange Commission (SEC) approval of Bitcoin exchange-traded funds (ETFs), Bloomberg’s senior ETF analyst Eric Balchunas foresees a potential shift in the conservative stance of asset management giant Vanguard regarding spot Bitcoin ETFs.

Vanguard recently announced its intention to remove Bitcoin futures ETFs from its platform and had no plans to introduce a similar product. This move aligned with the company’s commitment to offering investors a core set of products and services, maintaining a significant distance from Bitcoin (BTC) and other digital currencies.

The $7.7 trillion asset manager also recently restricted customer access to the newly approved spot Bitcoin ETFs. The move stirred controversy within the crypto community, leading some Vanguard clients to express dissatisfaction and choose to transfer their funds to other firms with a more favorable stance on digital currencies. For example, competitors such as BlackRock and Fidelity have embraced cryptocurrency by launching their own successful Bitcoin ETFs.

Amid this controversial move, Balchunas suggested that Vanguard might eventually reassess its position on alternative assets like spot Bitcoin ETFs due to the increasing demand for diversified investments and wealth expansion.

Balchunas also pointed out that Vanguard’s advisory business might play a role in driving them toward embracing alternative investments like cryptocurrencies in the future.

Vanguard’s crypto ventures

A closer examination of the company’s investment portfolio reveals Vanguard’s substantial investment in MicroStrategy, a prominent holder of Bitcoin. Co-founded by Bitcoin enthusiast Michael Saylor, MicroStrategy currently holds 190,000 BTC, valued at over $8.1 billion.

As of September 2023, Vanguard reportedly owns a substantial one million MicroStrategy shares, valued at more than $547 million. This amount positions Vanguard as the second-largest institutional shareholder after Capital International Investors.

In addition to Bitcoin holdings, Vanguard reportedly invested over half a billion dollars in Bitcoin mining companies last year. Documents reveal that Vanguard Group augmented its holdings in Marathon Digital by 60 percent, escalating from 10.9 million shares to 17.5 million.

When the news broke, Marathon Digital was valued at $16.03 per share. This adjustment translated to Vanguard’s investment standing at $280.5 million in Marathon Digital shares.

The investment giant also increased its position in Colorado-based Riot Blockchain by nearly 18 percent. Vanguard’s holdings in Riot Blockchain rose from 15.2 million shares to 17.9 million, translating to a value exceeding $281 million in stock. This cumulative investment propels Vanguard’s total involvement in Bitcoin miners to $560 million.

ETF — a milestone for crypto

The recent approval of Bitcoin ETFs by the SEC marked a crucial moment for the largest cryptocurrency and the wider crypto industry. The green light was given to a total of 11 applications, including BlackRock (BLK.N), Ark Investments/21Shares (ABTC.S), Fidelity, Invesco (IVZ.N) and VanEck.

Despite concerns raised by certain officials and investor advocates regarding the associated risks, the approval signals a significant development. These ETFs are recognized as a transformative force for Bitcoin, providing investors with a pathway to exposure without direct ownership. This is considered a substantial boost for an industry that has faced its fair share of controversies.

Analysts at Standard Chartered also predict that the ETFs could attract a staggering $50 billion to $100 billion within this year alone. While optimism runs high, other market experts suggest a more measured inflow of around $55 billion over a span of five years.