Who’s Sitting Out the Bitcoin ETF Race?
The cryptocurrency market has been buzzing for months with the potential approval of spot Bitcoin ETFs. Most experts are pinning their bull market hopes on this type of regulated exchange-traded funds. It appears as though nearly every prominent financial market player has lodged applications with the U.S. Securities and Exchange Commission (SEC). However, this isn’t entirely the case.
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The world's largest investment company, BlackRock Inc., with $8.59 trillion under management, is keenly awaiting the SEC's green light. Yet, its two major rivals, Vanguard Group and State Street Global Advisors, private investment fund management firms, are notably wary of the trending BTC ETF topic. These companies, along with BlackRock, are known as the U.S.'s ‘Big Three' in investment.
Vanguard Group, a major shareholder in financial heavyweights like Bank of America, JPMorgan Chase, Citigroup, Goldman Sachs, and Morgan Stanley, also has stakes in Apple, Microsoft, Amazon, Meta Platforms, Alphabet, and more. The group manages $8.1 trillion in assets.
State Street, in its turn, manages assets amounting to $3.48 trillion. As of the end of 2022, the market value of State Street's shares, traded on NASDAQ and the NYSE, was about $1.8 trillion. This portfolio includes significant stakes in tech giants such as Apple, Microsoft, Alphabet, and Amazon.
Vanguard Group sends a definitive message to the market: they are not entering the race for spot Bitcoin ETFs, reflecting their overall skepticism towards cryptocurrency.
“Our position is clear: Vanguard has no intent to offer a spot Bitcoin ETF or any other crypto-related products. Vanguard believes that the investment case for cryptocurrencies is weak,” the company asserts.
Vanguard cites the high volatility of cryptocurrencies, which undermines their ability to assure long-term profits for investors. Additionally, the firm believes that “most crypto assets lack intrinsic economic value and generate no cash flows.” Vanguard, therefore, prefers passive ETFs that track various market indexes, offering a diverse range of stocks to investors.
On the other hand, State Street's approach is less absolute. “We continuously evaluate our lineup of ETFs, but at this time we do not offer a crypto ETF,” the company clarifies. This consideration becomes more relevant when remembering the analogy of Bitcoin as the new form of gold. Often, the price movements of these two assets align. From this perspective, it's conceivable that State Street might eventually explore launching a BTC ETF, especially given their expertise with gold, evidenced by managing the SPDR Gold Trust – a $57 billion exchange-traded fund fully backed by their gold bullion reserves.
Bloomberg highlights that Vanguard Group and State Street have previously resisted succumbing to market frenzy. In 2020, these investment firms decided against participating in the emerging trend of Active Non-Transparent (ANT) ETFs (which, unlike standard ETFs that disclose their holdings daily, only do so quarterly). ANT ETFs were anticipated to attract substantial investments and capture a significant market share. However, these predictions have not yet been realized. Time will tell whether Vanguard Group and State Street's decision to stay out of the spot Bitcoin ETF market was prudent.
We previously reported about Blackrock CEO Larry Fink shedding his skepticism about virtual assets and becoming a true crypto supporter.
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