Vanguard: investment in Bitcoin mining

Yesterday, it was revealed that Vanguard has increased its investment in Bitcoin mining companies Marathon Digital Holdings and Riot Blockchain.

The Vanguard Group and increased exposure to Bitcoin mining

The Vanguard Group (often just called Vanguard) is one of the world’s largest investment companies.

It is based in the US, and has about $7.7 trillion in assets under management. 

Vanguard was founded in 1975 in Pennsylvania, and to date is the largest provider of mutual funds, and the second largest provider of ETFs after BlackRock’s iShares. 

It also offers brokerage, educational account services, financial planning, wealth management, and trust services. 

In addition, several mutual funds managed by Vanguard have ranked among the top US mutual funds by assets under management, and along with BlackRock and State Street it is considered one of the big three index fund managers with a dominant role in the US. 

A special characteristic is that since it is owned by the funds it manages, it is actually owned by its clients. 

Bitcoin mining and Vanguard’s commitment

The company began investing in Bitcoin mining in 2020, which was before the last big bull run. 

In particular, it invested by buying shares in mining companies, such as Marathon Digital Holdings and Riot Blockchain.

A couple of days ago these two companies released documents revealing that Vanguard has increased its investment in the companies. 

Regarding Marathon Digital Holdings, the document reveals that Vanguard now owns as many as 17.5 million shares, or 10.31% of the total. 

It is therefore not the single largest shareholder, but it now holds a significant enough share to be the single largest shareholder in the company, ahead of even BlackRock. 

As for Riot Blockchain, the other document reveals that Vanguard now owns as many as 17.9 million shares, or 10.24% of the total. Again, it is not the single largest shareholder, but the single largest shareholder in the company, also ahead of BlackRock. 

It is worth noting that not only is it now by far the single largest shareholder in both companies, but also that the second largest shareholder is BlackRock, which is the world’s largest asset manager. 

This means that industrial Bitcoin mining is of great interest to investment funds. 

Investments in Bitcoin mining

Another particularly interesting fact is about Vanguard’s increased investment in these two companies. 

In fact, thanks to the latest investment, the company has increased the number of shares it owns in Marathon Digital Holdings from 10.97 million to 17.5, an increase of almost 60%. In contrast, as for Riot Blockchain, it increased from 15.2 million to 17.9 million shares, an increase of 18%. 

These are therefore significant increases, which may sound strange in view of next year’s halving. 

Indeed, with the halving of spring 2024, the reward received by miners who manage to validate a block is halved from 6.25 to 3.125 BTC, and this will inevitably reduce miner earnings. 

It is precisely because of this that the competition will get tougher, given that Bitcoin mining is a competition, which will probably drive smaller miners out of the market in favor of larger ones. 

Marathon Digital Holdings and Riot Blockchain are in fact among the largest US miners, and the world’s largest computing power dedicated to this activity is concentrated in the US. 

Paradoxically, therefore, it could be companies like Marathon Digital Holdings and Riot Blockchain that stand to gain the most from the halving, thanks in part to new, more efficient machines that, requiring large investments, will be within the reach of these giants in particular. 

At this point, Vanguard’s decision to increase its exposure to Bitcoin industrial mining is not all that surprising. 

The impact on the price of BTC

While this news in itself might not have any significant impact on the price of Bitcoin, the reasoning behind it might suggest that traditional finance giants like Vanguard expect new increases. 

Then again, it is no coincidence that the company entered the industry precisely in 2020, which is the year of the previous halving, before the last big bullrun was triggered. 

For example, Marathon Digital Holdings’ stock price in the past three years has risen 1,900%, while Riot Blockchain’s stock price has risen 725%. 

What’s more, today in pre-market both are up slightly.

Given that these increases are due precisely to an increase in the value of Bitcoin, it is possible to imagine that Vanguard’s further investments reveal the company’s hope that it will again be able to make money from them, even and especially from further increases in the value of the price of BTC.