In a twist that few industry observers anticipated, Vanguard has emerged as the top shareholder of Strategy (MSTR). The $10 trillion asset management firm now controls just over 20 million shares of MSTR, representing nearly 8% of the company’s Class A stock. This shift is even more significant when considering Vanguard’s previous stance on Bitcoin, wherein it characterized the cryptocurrency as “immature” and lacking “inherent economic value”. Now, Vanguard is unexpectedly linked to the Bitcoin ventures of Strategy’s co-founder, Michael Saylor.
Index Strategy in Action
According to industry reports, Vanguard’s foray into MSTR was not a deliberate endorsement of Saylor’s Bitcoin strategy. Instead, it reflects Vanguard’s adherence to its index-fund rules. As MSTR’s stock value surged, it became a larger component in the indexes Vanguard manages, forcing the asset manager to purchase more shares. This passive investment approach has resulted in a significant stake worth millions, demonstrating how index investing can lead to active roles in less conventional markets.
Vanguard’s CEO, Tim Buckley, once warned that Bitcoin “could wreak havoc on portfolios,” highlighting the skepticism surrounding the cryptocurrency’s long-term investment potential. Despite this caution, Vanguard could not ignore MSTR’s growing market presence, and consequently, it has been drawn into the Bitcoin narrative, regardless of management’s views on the asset.
Indirect Exposure to Bitcoin Increases
As it stands, Strategy holds approximately 601,550 BTC, making MSTR a crucial player in the cryptocurrency landscape. Each MSTR share represents a fraction of this extensive Bitcoin reserve, meaning Vanguard’s index investors are indirectly exposed to over half a million BTC. Since its low in 2020, MSTR stock has skyrocketed by around 3,400%, further bolstering its ascent into Vanguard’s portfolio.
Institutional Support Marks a Turning Point
This surprising development has prompted commentary from analysts like Michael Saylor, who views Vanguard’s stake as a clear indication that institutional investors are beginning to accept Bitcoin as a viable asset class. Historically, large investment firms have dismissed Bitcoin as a niche opportunity, but with Vanguard’s substantial investment, it appears that attitudes are shifting. Such institutional backing may pave the way for broader acceptance among traditional financial entities.
The implications of this shift cannot be understated. Vanguard’s index-linked investment may serve to further legitimize Bitcoin in the eyes of cautious investors. In the words of analyst Eric Balchunas, this scenario highlights a certain irony in the stock management strategy: Vanguard must own all stocks in its benchmarks, regardless of its sentiments towards them.
