Vanguard, one of our top investment firms, shuns crypto 'like the plague.' That's good for its customers

www.latimes.com ^ | Michael Hiltzik

[NoLibZone]

After Jan. 10, when the Securities and Exchange Commission approved the first bitcoin exchange-traded investment products, the biggest investment firms jumped into the pool with both feet, jostling one another to offer their clients, big or small, access to bitcoin funds.

All, that is, except the second-biggest private investment management fund on the planet, Vanguard Group.

The firm has made clear, most recently in a Jan. 24 message to its clients, that it has no plans to offer a bitcoin exchange-traded fund (ETF) or any other cryptocurrency-related products. Nor will it allow any such products from other firms to be offered via its brokerage arm

"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,” Vanguard’s global head of ETF Capital Markets.”-

Janel Jackson, Vanguard

Vanguard spelled out precisely why it is shunning crypto despite the "headlines and buzz" the asset class generates. Put simply, it doesn't think crypto belongs in retail investors' portfolios.

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.

Bitcoin and other crypto investments have typically spelled financial disaster for ordinary investors. Stories of life savings lost in supposedly safe crypto investments are distressingly common.

Vanguard's executives know they're swimming against a tide of pro-crypto propaganda from entertainment and sports stars as well as prominent authors. That doesn't faze them.

"In Vanguard's view, crypto is more of a speculation than an investment," Janel Jackson, the firm's global head of ETF capital markets, stated in the recent message, which was headlined "No bitcoin ETFs at Vanguard? Here's why."

[NoLibZone]

"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,” Vanguard’s global head of ETF Capital Markets.”-

Janel Jackson, Vanguard

[SaveFerris]

Seems reasonable

[Worldtraveler once upon a time]

Like carbon credits, it is pieces of paper -- and now "virtual" paper -- which indeed is all held aloft by perception, and perception alone.

And as with all things digital, when a crypto file is digitally lost, it is lost. That some banks are offering this ETF stuff within the constraints of "not guaranteed," it can go "poof."

Real assets are real, tangible and with a documentation trail clear and above board. Anyone going to lose confidence in their home (most people's major asset)? Real estate and other real assets are real. Vanguard is correct on this.

Will Rogers quipped decades ago, "double your money. Fold it up and put it back in your pocket." The first rule is to NOT lose money. Almost every casino customer says some version of "I was ahead, before...." House rules.

[zeestephen]

Re: "crypto has been classified as a commodity"

I disagree.

I think of Bitcoin as a highly liquid asset, that can be securely and easily traded and stored, at a very low cost.

In theory, the exact number of Bitcoins is stable and widely known, which should make it an ideal hedge against inflation and currency fluctuation.

In reality, the exact number of dormant and misplaced Bitcoins is a mystery that may never be solved.

[nitzy]

Everything Vanguard says here is exactly true. Bitcoin ETFs are very stupid.

I would say the same thing if they were creating Baptist Church ETFs. That wouldn’t make Baptist Churches bad though.

The reason Bitcoin ETFs are stupid is because Bitcoin itself IS AN ETF.

[nitzy]

And as with all things digital, when a crypto file is digitally lost, it is lost.

How is that different than gold? If you lose a gold bar, are you somehow able to regenerate it?

[Worldtraveler once upon a time]

--- "How is that different than gold? If you lose a gold bar, are you somehow able to regenerate it?"

A fascinating question. It needs answering by simple questions.

1) When was the last time you, or someone in the circle of your family and friends, has lost a digital file?

2) When was the last time you, or someone in the circle of your family and friends, has lost a gold bar?

[nitzy]

1) When was the last time you, or someone in the circle of your family and friends, has lost a digital file?

Nobody I know has ever lost a file that was worth thousands of dollars.

2) When was the last time you, or someone in the circle of your family and friends, has lost a gold bar?

Nobody I know has ever owned a gold bar. They are too risky and difficult to protect.

If you understood crypto wallets you would know that there are numerous safeguards that one can put in place to prevent them from "losing" a file. You can generate a seed phrase consisting of a series of words that you can use to restore your wallet. You could theoretically walk across an international border with $1,000,000,000 inside your head. Now do you get why the government hates it so much?

In keeping with the gold/crypto comparison...

Can the government take gold bars from you by force?
Can they force you to reveal a series of words stored only in your head?
How much does it cost to protect gold bars?
How much does it cost to protect a series of words in your head?

Crypto > Gold

[Worldtraveler once upon a time]

--- "If you understood crypto wallets you would know that there are numerous safeguards that one can put in place to prevent them from 'losing' a file."

You make the assumption that I am not informed about "wallets." That is an incorrect assumption. For your reading pleasure:

Cracking a $2 million crypto wallet

Cryptocurrency Hardware Wallets Can Get Hacked Too

Hacking Crypto Wallets Is Latest Strategy in Quest to Recover Lost Billions

Hackers steal $600m in major cryptocurrency heist

Thousands of Coinbase wallets drained by hackers

Many more news items which could be posted, but you should be savvy enough to "search engine" more.

As to owning metals, we hold our own. So now you know a couple who have "risky and difficult to protect" assets which are protected enough by "possession." And privacy. And 2A.

[nitzy]

Thank you for the interesting links.

Unfortunately, I don’t know any of the people mentioned in them so my assertion is still correct.

Also, none of them involved losing Bitcoins because they “lost a file”. One never generated a seed phrase and lost a PIN. Others involved crypto exchanges getting hacked. It is a definite no-no to store your crypto on an exchange.

None of your examples involved people using reputable digital wallet software, creating a seed phrase and then taking the wallet offline. While that does take a little bit of effort, it is still much easier to protect than gold is with physical storage and protection with 2A.

In addition to ease of protection, there is no comparison in totality of protection. Your possession, privacy and 2A won’t protect your gold from the government if they feel the need to take it.

I appreciate the heads up regarding hardware wallets. I have never used one and but I didn’t know they could be hacked. I will avoid using them in the future.

[Worldtraveler once upon a time]

Some additional tales.

Lost Passwords Lock Millionaires Out of Their Bitcoin Fortunes

This man owns $321M in bitcoin — but he can't access it because he lost his password

Tens of billions worth of Bitcoin have been locked by people who for

I Lost My Bitcoin Password - and It's Extremely Painful

$140 billion in Bitcoin Is 'Lost' Due to Forgotten Passwords

UK man makes last-ditch effort to recover lost bitcoin hard drive

Generally, I am distrustful for a variety of reasons. One involved a hard drive which was wiped in error. Errors happen. Technology fails. Not often, but when it does....