Why One Bitcoin-Hating Company is in a Very Awkward Position

When Bitcoin ETFs first burst onto the scene in January 2024, there was one major asset management firm that made its disdain for crypto known: Vanguard.

In a detailed blog post, executives argued that BTC doesn’t have a role to play in “long-term portfolios” because it’s more of a speculation than an investment. The company’s head of ETF capital markets, Janel Jackson, explained at the time:

“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.”

BlackRock and Fidelity Investments have been far more enthusiastic in rolling out these Wall Street products, which allow institutions to gain exposure to Bitcoin’s spot price without owning it directly. And in crypto circles, Vanguard’s stance attracted a fair amount of disdain, with some threatening to boycott the brand.

You could argue that Vanguard’s also been on the wrong side of history here. BTC ETFs now collectively hold $153.3 billion in net assets — equivalent to 6.4% of this digital asset’s market capitalization. BlackRock’s iShares Bitcoin Trust is the fastest-growing fund in history too, with daily inflows across the market regularly exceeding $1 billion in the run-up to a fresh all-time high of $120,000.

Vanguard’s new chief executive Salim Ramji doubled down on the company’s position when he was appointed last year — arguing that Bitcoin just doesn’t align with its long-standing investment philosophy.

But in a bizarre turn of events, Vanguard is actually a much bigger player in the crypto world than you may think. In a rather delicious twist of irony, the firm now owns more Strategy stock than anyone else — meaning a substantial number of investors on its platform will have exposure to a company with the stated goal of amassing as much Bitcoin as possible.

In some ways, this decision is completely out of the investment giant’s control. Vanguard was a pioneer in offering index funds, which allow consumers to track hundreds of different stocks in one place. As its founder John C. Bogle once said: “Don’t look for the needle in the haystack. Just buy the haystack!”

Strategy’s extraordinary share price performance over the past five years has made it difficult to ignore. Since it started adding Bitcoin to its treasury back in 2020, stock in the business intelligence firm has jumped by a jaw-dropping 3,665%. MSTR regularly rallies during bull cycles, too. It’s surged by 23% in just six months, and 16% over the past 30 days.

Such box office returns and healthy financials led to Michael Saylor’s firm being included in the Nasdaq 100 for the first time — a move that prompts a rush of purchases as index fund providers race to rebalance their portfolios. The same can also be said for when Coinbase officially joined the S&P 500 in May — becoming the only crypto stock within this flagship index.

Estimates from Bloomberg suggest Vanguard now owns about 20 million Strategy shares, representing 8% of common stock. The U.S. media outlet’s ETF analyst Eric Balchunas reacted by saying “God has a sense of humor,” adding:

“Vanguard chose this life. When you have an index fund, you have to own all the stocks, for better or worse, and that includes stocks that you may not like or approve of personally.”

Strategy’s executive chairman Michael Saylor has also found it difficult to contain his glee — somewhat disingenuously arguing that Vanguard’s holding reflects “growing institutional support for Bitcoin.” No, Michael: it didn’t have a choice.

It’s the latest sign that the worlds of crypto and traditional finance are becoming more and more entwined.

Resurgent crypto stocks are undoubtedly good news for everyday investors currently saving for their retirement or a rainy day — especially those who don’t have the stomach for Bitcoin’s volatility, or the technical wherewithal to buy some for themselves.

But make no mistake: this is a road that goes two ways. And should Strategy’s stock end up crashing during the next bear market — or the company ends up in financial peril if its Bitcoin suddenly becomes worth less than its cost price — these same investors could end up taking a substantial financial hit.

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