Vanguard and Bank of America: The Bitcoin ETF Capitulation

Vanguard's Capitulation

Vanguard was one of the most notable holdouts during the 2024 Bitcoin ETF approval cycle. When BlackRock, Fidelity, and other institutions filed for Bitcoin ETFs, Vanguard famously declined, citing concerns about speculation and uncertainty about the asset itself.

Today, that resistance has crumbled. Vanguard now allows its users to buy Bitcoin ETFs on their platform. While they haven't launched their own ETF yet—which is surprising given that BlackRock's IBIT has become their most profitable ETF product—Vanguard users can now access spot Bitcoin ETFs like IBIT.

The irony isn't lost on anyone: Vanguard, whose name suggests being at the forefront, has become more of a rear guard in the Bitcoin adoption story. They were among the last major institutions to fall into place, but they're here now.

Bank of America's Policy Shift

In another significant development, Bank of America has changed its policy to allow financial advisors to actively recommend Bitcoin ETFs to clients. Previously, advisors at wirehouses and major financial institutions could only add Bitcoin exposure if clients specifically requested it. They weren't allowed to proactively suggest products like IBIT.

This policy change is significant because it opens the floodgates for institutional recommendations. BlackRock and other institutions have recommended Bitcoin allocations between 1-5% of portfolios. Bank of America is now estimated to recommend 2-4% allocations, which could drive massive inflows.

It's important to understand what "institutional money" really means: it's not BlackRock's money, Vanguard's money, or Bank of America's money. It's individuals' pensions, retirement accounts, and savings being managed by these institutions. This is individual exposure to Bitcoin, just funneled through institutional vehicles.

The Accessibility Thesis

My thesis for why Bitcoin ETFs would drive positive price action was simple: more accessibility means more ownership. In Bitcoin's early days, buying required mailing physical mail to Japan to an exchange originally designed for Magic: The Gathering cards. Or sending money to QuadrigaCX in Canada, where the owner later faked his own death. These were massive friction points that limited adoption.

The BlackRock IBIT ETF removed those barriers. Now, Vanguard and Bank of America are doing the same. When something is easier to access, more people will own it. This is basic economics, and it's playing out exactly as expected.

The demand for these ETF products creates demand for spot Bitcoin, which is then held by BlackRock and their custodians. While these aren't actual Bitcoin in self-custody, the underlying demand mechanism is real and powerful.

The Trojan Horse Effect

Here's where it gets interesting: Bitcoin ETFs are a Trojan horse for Bitcoin education and self-custody. When people see Bitcoin performing well in their portfolio—outperforming other assets—it catches their attention. They start asking questions: What is Bitcoin? Why is it performing so well? How does it work?

This curiosity leads to education. Education leads to understanding Bitcoin as a bearer instrument. Understanding leads to self-custody. And self-custody is where the real revolution happens.

Don't mistake this for corporate capture or institutional control of Bitcoin. This is part of the natural adoption story of a monetary asset. The path from ignorance to awareness to education to self-custody is how Bitcoin spreads. ETFs are just one vehicle on that path.

Eventually, people will realize that self-custody Bitcoin is worth more than Bitcoin held in a custodial agreement where you hold an IOU. The expense ratios that make IBIT BlackRock's most profitable ETF? Those will drive people toward self-custody as they learn more about Bitcoin's true nature.

Bitcoin's Current Stage: Collectible, Not Digital Gold

It's important to maintain perspective: Bitcoin is still in its collectible stage, not yet digital gold. Despite the institutional adoption, Bitcoin remains a fringe asset. The community feels massive, but in the grand scheme of global finance, it's still relatively small.

Bitcoin is being marketed for its store of value function, which is revolutionary and useful. But for Bitcoin to fully function as intended, it also needs to function as a medium of exchange. The Lightning Network and on-chain usage are what will transform Bitcoin from a collectible into actual money.

Self-custody and actual usage of Bitcoin—both on-chain and through the Lightning Network—are the revolution that makes Bitcoin money. Right now, it's a valuable collectible with store of value properties. The next stage is becoming a medium of exchange.

The Concentration Concern

Many people worry about Bitcoin concentration in ETF custodial wallets. It's true that BlackRock and other custodians are accumulating massive amounts of Bitcoin, and the private keys are controlled by these institutions, not the end users.

However, this concentration is likely temporary. As people learn about Bitcoin, they'll understand that:

• Self-custody Bitcoin is worth more than an ETF IOU
• You don't own Bitcoin if you don't control the keys
• The expense ratios are unnecessary costs
• Bitcoin's true value comes from being a bearer instrument

Over time, we'll see flows from custodial wallets to self-custody. The price of spot Bitcoin will reflect this premium compared to Bitcoin ETFs. This is predictive, of course, but it follows logically from understanding Bitcoin's fundamental properties.

What This Means for Price

The simple thesis: more accessibility leads to more demand, which leads to more price appreciation, which leads to more interest. More interest means more education, more self-custody, and more people understanding the flaws of fiat currency.

Bitcoin saw a price pump on the news of Vanguard and Bank of America's policy changes. Part of this was the asset being oversold and due for a bounce, but part of it is the fundamental demand increase from greater accessibility.

Over time, this means more individuals owning Bitcoin and less concentration in large wallets. The distribution of Bitcoin will improve as adoption spreads and people move from ETFs to self-custody. The Trojan horse is making its way beyond the gates.

The Forced Adoption

What's particularly interesting is that Vanguard and Bank of America didn't adopt Bitcoin because they wanted to. They were forced to because their customers demanded it. When enough people ask for Bitcoin exposure, institutions have to provide it or risk losing clients to competitors who do.

This is the power of Bitcoin: it creates its own demand. As purchasing power increases, more people notice. As more people notice, more people demand access. As more people demand access, institutions must provide it. This is a self-reinforcing cycle that Bitcoin's monetary properties create.

Conclusion

Vanguard and Bank of America's capitulation to Bitcoin is a significant milestone, but it's not the end of the story—it's part of the adoption journey. These institutions are providing accessibility, which drives demand and price appreciation. But the real value comes when people move beyond ETFs to self-custody and actual Bitcoin usage.

Bitcoin ETFs are a necessary step in Bitcoin's path to global adoption. They remove friction, increase accessibility, and serve as a Trojan horse for education. But they're not the destination. Self-custody, on-chain usage, and Lightning Network adoption are what will transform Bitcoin from a collectible into actual money.

Celebrate the price pump and increased accessibility, but remember: the real revolution happens when people take custody of their own Bitcoin and use it as money. That's when Bitcoin fulfills its true potential.