🩻 Vanguard’s Crypto Denial: A Bold Bet Against Hype—or a $1.5 Trillion Blind Spot? 🚨
Why Wall Street’s Most Trusted Name Just Declared War on Bitcoin ETFs
To Smart Investors,
The $1.5 Trillion Elephant in the Room
The financial world is losing its mind over Bitcoin ETFs. BlackRock, Fidelity, and even Wall Street’s old guard are rushing to cash in on the crypto gold rush. But Vanguard—the $7.4 trillion behemoth that revolutionized index investing—just dropped a nuclear bomb: “No Bitcoin ETFs. Not now. Not ever.”
While competitors scramble to appease crypto-hungry millennials and hedge funds, Vanguard’s leaders are doubling down on a controversial mantra: “Crypto isn’t investing. It’s gambling.”
Let’s dissect why this decision could cement Vanguard as the last sane voice in finance… or expose it as a dinosaur missing the biggest wealth transfer in history.
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. This is driven, in large part, by bitcoin’s extreme volatility.
Source: Vanguard
Vanguard’s “Four Screens” of Doom: Why Bitcoin Failed the Test
Vanguard’s product approval process is infamous for its rigor. To even consider a new offering, it must pass four brutal filters:
Investment Merit (“Does it have intrinsic value?”)
Client Needs (“Will this help investors retire?”)
Competitive Advantage (“Can we do this better than anyone?”)
Feasibility (“Can we execute flawlessly?”)
Bitcoin, according to Vanguard, flunked the first three.
Janel Jackson, Vanguard’s ETF chief, didn’t hold back:
“Equities pay dividends. Bonds pay interest. Commodities power the global economy. Bitcoin? It’s a speculative token with no cash flow, no intrinsic value, and a volatility curve that looks like a Richter scale during an earthquake.”
Translation: Vanguard sees Bitcoin as a casino chip masquerading as an asset.
The Morningstar Massacre: How 5% Bitcoin Torpedoes Your Portfolio
Vanguard’s skepticism isn’t baseless. Morningstar recently modeled a “conservative” 60/40 portfolio with a mere 5% Bitcoin allocation. The result?
Risk spiked by 50%
Volatility doubled
Drawdowns became 3x deeper
Andrew Kadjeski, head of Vanguard’s brokerage arm, drove the point home:
“Bitcoin dropped 77% in 2022, then soared 150% in 2023. That’s not investing—it’s Russian roulette. And remember: If you lose 50%, you need a 100% gain just to break even.”
For context: The S&P 500’s worst annual drop since 1950 was 37% (2008). Bitcoin’s average intra-year crash? 45%.
Vanguard’s Ruthless History of Saying “No” (And Why It’s Made Clients Billions)
This isn’t Vanguard’s first rodeo. The firm has a track record of ignoring manias—and being proven right:
1999: Refused to launch “internet funds” during the dot-com bubble.
Result: Avoided 78% losses when Pets.com et al. imploded.
2019: Banned leveraged ETFs (3x S&P bull/bear funds).
Result: Saved investors from guaranteed decay (leveraged ETFs bleed value over time).
2022: Axed most OTC penny stocks.
Result: Dodged the 2023 “meme stock 2.0” massacre.
Pattern recognition is Vanguard’s superpower. They know euphoric crowds are usually wrong.
The Blockchain Paradox: Vanguard’s Quiet Crypto Bet
Here’s the twist: Vanguard loves blockchain.
While trashing Bitcoin ETFs, Jackson revealed the firm is “actively researching” blockchain to streamline settlements, reduce fraud, and slash trading costs. Translation: They’re betting on the tech—not the tokens.
This mirrors Goldman Sachs’ approach: Embrace blockchain for back-office efficiency, but avoid “digital gold” hype.
The Million-Dollar Question: Is Vanguard Right… or Reckless?
Let’s cut through the noise.
Case for Vanguard:
Math doesn’t lie: Bitcoin’s Sharpe ratio (risk-adjusted return) is worse than equities over 5 years.
Tax drag: Crypto’s wild swings tempt investors to trade—triggering capital gains and fees.
Regulatory risk: The SEC still calls crypto a “Wild West.” A crackdown could vaporize ETFs overnight.
Case Against Vanguard:
Adoption wave: BlackRock’s ETF hauled in $3 billion in 48 hours. Institutions aren’t dumb money.
Inflation hedge: Bitcoin’s fixed supply could protect against central bank recklessness.
Generational shift: 40% of millennials own crypto. Vanguard risks alienating future clients.
My Take: What This Means for YOU
As someone who’s modeled financial systems at MIT, I see merit in both sides. But here’s my blunt analysis:
If you’re under 40: Allocate 1-3% to Bitcoin as a lottery ticket. Treat it as speculation—not a “digital gold” core holding.
If you’re near retirement: Avoid crypto entirely. Volatility could derail decades of compounding.
Watch Vanguard’s blockchain moves: Their real crypto play isn’t ETFs—it’s rebuilding Wall Street’s plumbing.
Vanguard’s decision isn’t about morality or Luddism. It’s cold, hard math. And while I’d never dismiss crypto’s upside, their stance is a wake-up call: True investing requires cash flows, not cults.
The Bitcoin ETF frenzy is a litmus test for your financial philosophy. Are you a disciplined Boglehead? A speculative opportunist? Or something in between?
One thing’s certain: In a world of TikTok traders and AI hype bots, Vanguard’s stubbornness is either its greatest strength… or the moment it lost a generation.
May the LORD Bless You and Your Loved Ones,
Jack Roshi, PhD (MIT, Applied Mathematics)
Lead Quant & Founder