Why Vanguard's Bitcoin Stance Is a Good Move: Morningstar

Vanguard Group’s decision not to offer customer access to spot bitcoin exchange-traded funds is a good sign for the fund giant and its clients, despite drawing sharp criticism from investors, according to Morningstar’s vice president, research, John Rekenthaler.

“Not only has the company forsworn creating a bitcoin ETF, but it refuses to carry anybody else’s bitcoin funds on its brokerage platform. Those wishing to purchase cryptocurrencies must go elsewhere,” he said in a column posted Monday, adding that the decision “delighted” him even as it angered crypto enthusiasts.

Vanguard historically often avoided offering in-demand funds that “crashed and burned” for many peers, Rekenthaler noted.

“Doing so benefited its business far more than collecting a few billion dollars of incremental assets. Investors realized which fund companies had burned them — and which hadn’t. Over time, they might have forgotten the details. But they remembered how they had been treated,” Rekenthaler wrote.

Critics might argue that bitcoin is different from earlier products that Vanguard avoided, as the proponents consider the cryptocurrency as “digital gold” and a store of value, he noted.

“If so, Vanguard could conceivably be called hypocritical,” as it offers many single-commodity funds on its brokerage platform, including ETFs investing in gold bullion or oil barrels, Rekenthaler said.

“Fine by me. First, simply calling bitcoin ‘digital gold’ does not make it so. Physical gold broke even during 2022′s financials-market meltdown, while bitcoin’s price collapsed,” he wrote.

“Second … in Vanguard’s judgment, cryptocurrency is currently unsuitable for its clients. In the future, that may change. But its ruling is for the here and now,” the research said.

Vanguard’s move is line with its late founder’s philosophy, Rekenthaler wrote, noting that John Bogle (who died in early 2019) recommended investors “avoid bitcoin like the plague.”