What Bitcoin ETFs Vanguard offers

Vanguard offers one Bitcoin ETF: the Vanguard Bitcoin ETF (VBR), which launched in June 2024. This is a spot Bitcoin ETF, meaning it holds actual Bitcoin rather than Bitcoin futures contracts. You can buy VBR through a Vanguard brokerage account the same way you would buy any other ETF — by placing an order during market hours.

Vanguard also offers the Vanguard Bitcoin Strategy ETF (VBTC), which launched in January 2024. This fund uses Bitcoin futures contracts rather than holding Bitcoin directly. Both funds track Bitcoin's price movement, but they do so through different mechanisms, which affects their tax treatment and how they move in price.

Before VBR and VBTC, Vanguard did not offer a direct Bitcoin investment product. If you held a Vanguard account and wanted Bitcoin exposure, you had to buy Bitcoin ETFs from other providers like iShares or Grayscale through your Vanguard brokerage account.

Key Takeaways

  • Vanguard's VBR is a spot Bitcoin ETF that holds actual Bitcoin, while VBTC uses Bitcoin futures contracts and launched earlier.
  • You can purchase either fund through any Vanguard brokerage account during regular market hours like any other ETF.
  • Spot Bitcoin ETFs like VBR are taxed differently than futures-based ETFs like VBTC, which can affect your after-tax returns.
  • Vanguard's Bitcoin ETFs carry expense ratios (annual fees), which vary between the two funds and should be compared against other Bitcoin ETF providers.

How VBR (spot Bitcoin) differs from VBTC (futures-based)

VBR holds actual Bitcoin in custody, so when you own VBR shares, the fund owns Bitcoin on your behalf. The price of VBR tracks the spot price of Bitcoin — the current market price you see quoted. This structure is simpler and more direct: the fund buys Bitcoin, holds it, and the value of your shares moves with Bitcoin's value.

VBTC uses Bitcoin futures contracts instead. A futures contract is an agreement to buy or sell Bitcoin at a set price on a future date. The fund does not hold Bitcoin itself; it holds a rolling series of these contracts. This approach can create tracking differences — the fund's price may not move exactly in line with Bitcoin's spot price — because futures prices sometimes differ from spot prices, especially when Bitcoin is in contango (futures trading at a premium) or backwardation (futures trading at a discount).

For tax purposes, VBTC is taxed under Section 1256 of the tax code, which means gains are taxed as 60% long-term capital gains and 40% short-term capital gains, regardless of how long you held the fund. VBR is taxed as a regular security, so your tax rate depends on how long you held it. This difference can be significant if you trade frequently or hold the fund in a taxable account.

Expense ratios and fees you pay

VBR charges an annual expense ratio of 0.20%, meaning you pay $2 per year for every $1,000 invested. VBTC charges 0.25% annually. These fees are deducted from the fund's assets automatically; you do not pay them separately.

Other Bitcoin ETF providers charge different amounts. Some charge as low as 0.19% or as high as 0.25% or more. Over time, even small differences in fees compound, so comparing expense ratios across providers matters if you plan to hold Bitcoin through an ETF for years.

Beyond the expense ratio, you may pay a trading commission when you buy or sell VBR or VBTC through Vanguard. Vanguard does not charge commissions on most ETF trades for Vanguard brokerage account holders, but confirm this with your specific account type before trading.

How to buy Vanguard Bitcoin ETFs

To buy VBR or VBTC, you need a Vanguard brokerage account (not a retirement account like an IRA or 401(k), unless your plan allows self-directed brokerage windows). Log into your account, search for the ticker symbol (VBR or VBTC), and place a buy order for the number of shares you want. The order executes during market hours, typically within seconds.

You can also buy these ETFs through a non-Vanguard brokerage account if your broker carries them. Most major brokers do. The process is the same: search the ticker, enter the number of shares, and submit the order.

If you hold a Vanguard IRA or 401(k), check whether your plan allows you to buy individual ETFs. Some employer 401(k) plans restrict you to a limited menu of investments, while IRAs typically allow any ETF that Vanguard offers. Your plan documents or a call to Vanguard can confirm what you can hold.

Bitcoin ETFs versus buying Bitcoin directly

Buying a Bitcoin ETF like VBR is different from buying Bitcoin directly through a cryptocurrency exchange. With an ETF, you own shares of a fund that holds Bitcoin; you do not own Bitcoin itself. The fund holds the Bitcoin in custody, and you rely on the fund manager to find it.

Buying Bitcoin directly means you own the Bitcoin outright, usually stored in a digital wallet. You control the private keys (the passwords that prove ownership), but you are also responsible for keeping them safe. If you lose the keys, you lose access to the Bitcoin. If your exchange is hacked, your Bitcoin may be stolen.

ETFs remove the burden of securing Bitcoin yourself, but you pay fees and you do not control the Bitcoin directly. For most people holding Bitcoin in a taxable or retirement account, an ETF is simpler and safer than managing a digital wallet. For people who want to use Bitcoin as a currency or move it between exchanges, buying Bitcoin directly is necessary.

Tax treatment of Bitcoin ETF gains

If you hold VBR in a taxable account and sell it for a profit, you owe capital gains tax. If you held the shares for more than one year, the gain is taxed at the long-term capital gains rate (0%, 15%, or 20%, depending on your income). If you held them for one year or less, the gain is taxed as ordinary income at your regular tax rate.

VBTC is taxed differently because it holds futures contracts. The IRS treats VBTC gains as 60% long-term and 40% short-term, regardless of how long you held the fund. This can be advantageous if you hold VBTC for less than a year, because part of your gain gets the long-term rate anyway. It can be disadvantageous if you hold it for many years, because you never get the full long-term rate.

If you hold either ETF in a retirement account like a traditional IRA or Roth IRA, you do not pay capital gains tax when you sell. You pay tax on withdrawals from a traditional IRA (at ordinary income rates) or no tax on may have access to withdrawals from a Roth IRA. This makes retirement accounts a tax-efficient place to hold Bitcoin ETFs if you are a frequent trader.

Frequently Asked Questions

Can I buy Vanguard Bitcoin ETFs in my IRA?

Yes, if your IRA is self-directed. Traditional IRAs and Roth IRAs held at Vanguard typically allow you to buy any ETF that Vanguard offers, including VBR and VBTC. Employer-sponsored IRAs (SEP-IRAs, Solo 401(k)s) usually allow it as well. Check your account documents or contact Vanguard to confirm your specific plan allows individual ETF purchases.

What is the difference between VBR and VBTC for a long-term holder?

For someone holding Bitcoin for many years in a taxable account, VBR is likely more tax-efficient because long-term gains on VBR get the full long-term capital gains rate. VBTC's 60/40 split means you never get the full benefit of holding for over a year. In a retirement account, the difference matters less because you are not paying capital gains tax anyway.

Do I need a Vanguard account to buy these ETFs?

No. You can buy VBR and VBTC through any brokerage account that carries them, including Fidelity, Charles Schwab, E-Trade, or others. You do not need to be a Vanguard customer. However, if you already have a Vanguard account, you can buy them there without paying a commission on most account types.

How does Vanguard's Bitcoin ETF compare to iShares or Grayscale?

Vanguard's VBR charges 0.20% annually, while iShares' spot Bitcoin ETF (IBIT) charges 0.19% and Grayscale's Bitcoin Mini Trust (BTC) charges 0.20%. The differences are small. All three hold actual Bitcoin. The choice often comes down to which brokerage you use and whether you already have a relationship with Vanguard.