In an interview with CNBC, Tim Buckley, the newly appointed CEO of the asset management firm Vanguard, clarified that the firm has no intention of introducing any Bitcoin-related funds.
Though Mr. Buckley praised blockchain technology (aka distributed ledger technology), the core technology behind Bitcoin, he is not comfortable with Bitcoin, as he believes that it has no underlying economic value.
“You will never see a fund from Vanguard on bitcoin,” said Tim Buckley.
He added: “We tend to stay away from assets that don’t have underlying economic value. They don’t generate earnings or cash flows.”
The value of Bitcoin skyrocketed last year. In 2017 alone, Bitcoin gained 1400 percent, but its value today is half that of its peak in mid-December – currently, it’s struggling to maintain its price above $10,000.
Though Bitcoin is highly volatile and returned excellent value to early investors, producing a new generation of millionaires, Mr. Buckley said that as the digital coin does not have any underlying economy or generate any cash flow, the gains are purely based on speculation.
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“The bitcoin – its value is based off of scarcity – and an artificial scarcity that’s out there. It’s really tough to imagine where the long-term return comes from other than speculation,” explained Mr. Buckley.
Even in a series of tweets recently, the Nobel Prize-winning economist Paul Krugman explained the speculative nature of Bitcoin and noted: “…If people come to believe that Bitcoin is worthless, well, it’s worthless. Its price rise has been driven purely by speculation…”
Mr. Buckley also pointed out that Vanguard does not even have a fund backed by precious metals like gold, as they are also devoid of any underlying economic value.
Despite Vanguard Group’s stand on Bitcoin funds, many asset managers are very positive about the introduction of Bitcoin ETFs. But due to the SEC’s recent hardline rules, many firms withdrew their submitted proposal for Bitcoin-backed ETFs.
Even though the SEC is not barring the introduction of the ETFs, it has set the entry barrier so high that it is practically impossible to introduce a profitable fund.
On a side note, the asset rating agency Weiss Ratings also announced that on 24th January, it will release grades of dozens of cryptocurrencies. This data-driven grading might push the Bitcoin-backed investment instruments in a positive direction.