Original text "Put the Crypto in the Index Funds"

Original author: Matt Levine

Compiled by: jk, Odaily Planet Daily

Bloomberg Chief Financial Writer: Why is the stock market willing to pay $2 for $1 worth of cryptocurrency?

What strategy did Vanguard adopt?

A basic situation today is that the U.S. stock market will use $2 of stock valuation to buy $1 of cryptocurrency. If a small public company holds $100 million worth of crypto assets such as Bitcoin, Ethereum, and Trump Coin, its market value will rise to at least $200 million. This transaction looks both confusing and like magic. The pioneer of this game is MicroStrategy (it now simply shortens its name to "Strategy", holds about $70 billion in Bitcoin, and has a market value of about $138 billion), and now all kinds of small companies are constantly imitating it, and it seems to be quite successful.

I often joke about this, but it is worth asking a serious question: Why is the stock market willing to pay $2 for $1 worth of cryptocurrency? There are three possible explanations for this question:

Bitcoin held by companies is worth more than what you hold yourself. Because companies can use these crypto assets to do things that you can't do, such as educating investors, lending, leveraging, staking, tokenization, in short, all kinds of "operations". From a business perspective, this premium is reasonable.
There is a lot of institutional capital that wants to buy Bitcoin, but they can't buy it, they can't hold it directly, and they can't hold it through more conventional (lower premium) methods such as futures and ETFs. So they are willing to pay a premium to invest indirectly through these "crypto vault companies." This premium comes from an imbalance in the market structure: these companies provide institutional investors with a "legal and compliant" form of investment.
Retail investors are lazy and confused, and they follow the trend to buy these stocks with the "crypto vault" label, without realizing that they are buying a bunch of overvalued crypto assets. In short, it is the "steal stock effect".

Every company that does this kind of operation will say the first reason - "We don't just hoard coins, we will do a lot of things", but I have always found this unconvincing. The third explanation - "Haha, retail investors" - sounds reasonable, and I have written similar views myself ("For many small US stock companies, the most direct attraction of the crypto vault strategy is: no one pays attention to our small company, but if we announce that we have bought a lot of cryptocurrencies, retail investors will be excited and rush in to buy our stocks at high prices.")

But it's the second point that's really interesting. If the logic is true: "Large asset managers want exposure to cryptocurrencies, and Strategy is the only way they can easily get it, so they're willing to pay a 100% premium for its stock", then... this sounds super weird, but maybe it's true? I checked Strategy's shareholder list on Bloomberg, and the second largest shareholder is Capital Group - a traditional fund management company that focuses on active investing, with a 6.99% stake. Is this a good investment? Over the past 12 months, Strategy's stock price has risen by about 175%, while the S&P 500 has only risen by 13%. So... yes?

Why didn’t Capital buy Bitcoin directly, instead of paying twice the price for Strategy? (As short seller Jim Chanos has questioned) Maybe they wanted to buy it, but couldn’t: Capital’s holdings came from its Growth Fund of America, which “invests primarily in common stocks” and “may invest in other types of equity securities,” but obviously does not include Bitcoin or Bitcoin ETFs. If you are a long-term fund manager who only invests in stocks and you want to buy Bitcoin, then over the past year, (1) you were right and (2) you couldn’t buy it. So buying Strategy may be your only practical choice.

So, the high premium on Strategy shares may reflect the expectation that “institutional investors want to buy ‘bitcoin in stock form’ and the market supply can’t keep up.” Another related but slightly different view is that “index funds will passively buy Strategy, no matter how high the premium is.” Capital is the second largest shareholder, but according to Bloomberg’s Vildana Hajric, the largest shareholder is actually Vanguard:

“Bitcoin is not for long-term investors. Digital assets are more speculation than investment. They are an ‘immature asset class’ with no clear history and no ‘intrinsic economic value’ that could bring ‘serious disruption’ to a portfolio.”

Vanguard executives have always firmly inherited the logic of founder Jack Bogle and have been critical of crypto assets. But ironically, according to the "cold logic" of passive investment in index funds, this giant with $10 trillion in assets under management has now become the largest shareholder of Strategy, a software company that has turned itself into a "Bitcoin shadow company."

Vanguard owns more than 20 million shares of Strategy, nearly 8% of its Class A common stock, and is likely to have surpassed Capital Group in the fourth quarter of last year. According to Bloomberg data, these holdings are distributed among dozens of Vanguard funds, covering various index products such as small-cap stocks, mid-cap stocks, momentum, value and growth.

And Strategy isn't even in the S&P 500 yet! ("Vanguard's largest holding is its total market capitalization index fund, VITSX, which holds about 5.7 million shares, valued at about $2.6 billion.") But Strategy is working hard to get in. Imagine how much more excitement it would have if it did.

And: Is that okay? I often joke about these things, but what do I know? Yesterday I just mocked a new "crypto vault company" whose asset reserves are HYPE tokens. "That's too straightforward," I wrote. But I often mock some ordinary public companies, and their stock prices sometimes go up anyway. This article is not investment advice, and most of my money is in index funds. I have learned a lesson: the financial phenomenon I want to laugh at has nothing to do with whether it will go up. I have no predictive ability at all, so I try to be a price taker - buy the market portfolio and accept the market return. Many investors should actually do this, or have done so.

In 2005, the “market mix” was mostly stocks and bonds; in 2025, it will undoubtedly include cryptocurrencies. There are many ways to get exposure to crypto assets now (you can buy Bitcoin directly, buy Bitcoin ETFs, etc.), and there will definitely be people emailing me about their startups that can help you easily get exposure to crypto indexes (for example, give them $100 and they will allocate a basket of crypto assets for you using a market capitalization weighted method).

But the simplest and laziest way is to just buy the entire US stock market index. Because the current stock market has been absorbing more and more "crypto vault companies". You may not want crypto assets to appear in your stock index fund - Vanguard doesn't want it either - but the essence of index funds is: not buying what you want to buy, but buying what the market wants to buy. (Not what the fund manager wants to buy.)

You don’t trust yourself (or your fund manager) to pick the right thing, so you trust the market. And right now, what the market wants is cryptocurrencies.

MicroStrategy increased its holdings of Bitcoin by 42,706 in the third quarter of 2025, worth over $5 billion.

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