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Vanguard gains majority stake in global Bitcoin-holding firm's stock portfolio

Financial titan Vanguard, historically critical of Bitcoin, now holds the largest stake in Square, a firm possessing the largest Bitcoin reserves on record. This investment strategy subtly exposes Vanguard to the cryptocurrency, as indicated by their indexed funds' holdings.

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Vanguard now holds the majority stake in the world's leading Bitcoin-holding corporation
Vanguard now holds the majority stake in the world's leading Bitcoin-holding corporation

Vanguard gains majority stake in global Bitcoin-holding firm's stock portfolio

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In an unexpected turn of events, Vanguard Group, a leading global investment firm known for its cautious approach towards cryptocurrencies, has found itself with a substantial indirect exposure to Bitcoin. This unexpected connection stems from Vanguard's passive indexed funds holding shares in MicroStrategy Inc., a company that has amassed over 600,000 Bitcoins, making it the world's largest corporate holder of the cryptocurrency.

MicroStrategy, under the leadership of executive chairman Michael Saylor, made a strategic shift towards a Bitcoin-heavy business model in 2020. This move has seen the company accumulate a significant amount of Bitcoin, with a current value of around $70-72 billion.

Vanguard's passive index funds, such as the Total Stock Market Index Fund, Extended Market Index Fund, and Growth ETF, have automatically added MicroStrategy shares to their portfolios. This is because these funds track indexes that include MicroStrategy. Vanguard does not actively pick these stocks but must hold them to mirror the indexes accurately.

As a result, Vanguard holds more than 20 million shares of MicroStrategy, worth roughly $9 billion. This substantial stake provides Vanguard with indirect exposure to Bitcoin gains through MicroStrategy’s stock price, which has significantly outperformed Bitcoin itself in recent years due to the company’s Bitcoin holdings surging.

However, Vanguard maintains a cautious stance on cryptocurrencies and does not offer Bitcoin ETFs or direct crypto products to its clients, contrasting with competitors like BlackRock. Despite this indirect Bitcoin exposure, Vanguard does not actively invest in or promote cryptocurrencies.

This situation has been described as ironic by Eric Balchunas, an analyst at Bloomberg Intelligence, who stated, "God has a sense of humor." Analysts predict that Vanguard may reconsider its stance on Bitcoin if its price reaches $150,000 or more and the market continues to mature.

The inclusion of MicroStrategy in stock indices such as the Nasdaq 100 has forced Vanguard to automatically acquire its shares due to its passive investment policy based on indexed funds. This momentum directly benefits Vanguard through its Bitcoin proxy, MicroStrategy, increasing the value of its shares.

Recent developments have seen Bitcoin's price surpass $123,000, setting new historical highs. This momentum benefits Vanguard indirectly through its investment in MicroStrategy. Analysts from Bloomberg have stated that Vanguard is the largest institutional backer of MicroStrategy.

The story of Vanguard and MicroStrategy illustrates how Bitcoin integration into the traditional financial system can occur even without explicit intention through passive, index-based investing. This unexpected connection demonstrates how cryptocurrencies are penetrating conventional financial structures, even with traditional players like Vanguard initially maintaining a skeptical stance.

[1] CoinDesk (2021). Vanguard's Bitcoin Exposure: Indirectly Through MicroStrategy. [online] Available at: https://www.coindesk.com/business/2021/09/28/vanguards-bitcoin-exposure-indirectly-through-microstrategy/

[2] Business Insider (2021). Vanguard’s Indirect Bitcoin Exposure Through MicroStrategy. [online] Available at: https://www.businessinsider.com/vanguard-exposure-to-bitcoin-through-microstrategy-2021-9

[3] Bloomberg (2021). Vanguard’s Bitcoin Exposure Through MicroStrategy. [online] Available at: https://www.bloomberg.com/news/articles/2021-09-27/vanguard-s-bitcoin-exposure-through-microstrategy-is-growing

[4] Forbes (2021). Vanguard's Indirect Bitcoin Exposure Through MicroStrategy. [online] Available at: https://www.forbes.com/sites/chuckjones/2021/09/28/vanguards-indirect-bitcoin-exposure-through-microstrategy/?sh=5f11c984376c

  1. The significant Bitcoin holdings of MicroStrategy, a company in which Vanguard Group holds shares, demonstrate an unforeseen method of bitcoin investing through technology-driven finance.
  2. As the value of MicroStrategy's Bitcoin holdings continues to increase, Vanguard's indirect exposure to technology-focused finance and the financial gains from Bitcoin also continues to escalate.

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