Fortune Article

The story of crypto in 2024 has been all about how giants of traditional finance, including BlackRock and Fidelity, have charged into the Bitcoin market with newly launched ETFs and set off a massive rally in the process. While this has been a watershed moment for crypto, which for years had been regarded with fear and disdain by Wall Street types, one notable name has been absent from the Bitcoin ETF party: the world’s second-biggest asset manager, Vanguard.

On Thursday, Vanguard surprised the financial world by announcing that CEO Tim Buckley, a 33-year veteran of the company, is stepping down at the end of the year. News reports suggest the decision was Buckley’s alone, and that he simply decided it was time to hand the reins to someone else, but that hasn’t stopped some people from speculating that there must be other reasons. This included the likes of Cameron Winklevoss suggesting Buckley is out because he caused Vanguard to miss out on the Bitcoin ETF extravaganza.

This is ridiculous. Despite the fervent belief of some that all things in this world revolve around Bitcoin, there is zero chance the leadership transition at Vanguard—which is busy overseeing $7.2 trillion in assets—had anything to do with crypto. Still, it is worth noting that Bitcoin ETFs have performed spectacularly, especially that of rival BlackRock. As analyst James Seyffart noted, the latter’s iShares fund (IBIT) is currently the third-biggest ETF in the country by asset flows, behind the Vanguard and BlackRock giant equity bundles VOO and IVV.

This raises the question of whether Vanguard’s next CEO will reconsider Buckley’s decision to refuse to offer Bitcoin to its clients. Probably not, since the decision was rooted in Vanguard’s broader risk-averse philosophy and desire to protect middle-class investors, which it explained in a recent blog post, “No Bitcoin ETFs at Vanguard? Here’s why.”

This decision was applauded by some, including a financial columnist at the Los Angeles Times who sniffed: “That’s a smart and responsible policy that places the interests of Vanguard’s clientele ahead of those of the greedy promoters and scamsters infecting the entire cryptocurrency field.”

The columnist is not wrong that there are many, many charlatans in the crypto market. But I think he is off the mark by conflating the bottom feeders promoting their latest pump-and-dump altcoin project, and Bitcoin—which has been the best-performing asset of this year and the past decade. I also note the columnist is 71 years old. That’s not a dig at his overall financial acumen, but rather a reminder that there is a huge generational difference when it comes to attitudes toward crypto. Older investors may look at it with fear and loathing, but those under 40 have grown up with it and have a very different view.

This brings us back to Vanguard and its assessment that Bitcoin is an “immature asset class that has little history, no inherent economic value, no cash flow, and can create havoc within a portfolio.” The firm is right about the cash flow bit, but you can say the same thing about gold and, while Bitcoin doesn’t have a long history, 15 years is not nothing. As for the idea that Bitcoin “can create havoc,” that feels a little much. Putting 50%, or even 10% of your family’s wealth into crypto, would be a very risky thing to do—but what about 1%? This newsletter doesn’t offer investment advice, but I will point out that standard investment theory calls for a diversified portfolio, which includes holding small amounts of volatile assets. If you accept this, holding a drop of Bitcoin doesn’t feel crazier than putting 1% of your wealth into South Asian real estate funds or whatever.

The bottom line is that this year’s surprise Bitcoin ETF rally has already led other big Wall Street names, which were initially skeptics, to say they are coming off the sidelines. That includes Morgan Stanley and Merrill Lynch. I predict that, even if Vanguard’s new CEO doesn’t immediately reconsider the firm’s anti-Bitcoin stance, it’s only a matter of time till they do.

Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts

DECENTRALIZED NEWS

Nigeria detained two Binance execs, a U.K. and a U.S. national, and ordered the closing of Coinbase and other exchanges in response to what authorities say is abuse of currency rules—though skeptics say the real problem is misgovernance. (Semafor)

Crypto.com and OKX were among 22 firms that met a Feb. 29 deadline to apply for a digital asset license in Hong Kong, though Coinbase, Kraken, and Binance did not apply. (Bloomberg)

Attorneys general from Texas, Montana, and other red states filed legal briefs in support of Kraken, which is claiming the SEC has overstepped its authority with its aggressive stance defining crypto as securities. (CoinDesk)

A trove of emails suggest Tether at times used falsified documents to gain access to the banking system, though this appears to have taken place at least five years ago. (WSJ)

JPMorgan analysts predict that Bitcoin prices, which remain above $60,000, could undergo a major correction to $42,000 after “Bitcoin-halving-induced euphoria” subsides in April. (Fortune)