Bank Of America Tells Wealth Management Clients 1-4% Bitcoin Allocation “Appropriate”

The second-largest bank in the US, Bank of America, has recommended a 1% to 4% Bitcoin allocation to its wealth management clients through Merrill, Bank of America Private Bank and Merrill Edge platforms.

“For investors with a strong interest in thematic innovation and comfort with elevated volatility, a modest allocation of 1% to 4% in digital assets could be appropriate,” said Bank of America chief investment officer Chris Hyzy in a statement to Yahoo Finance. 

Bank Of America Clients Will Have Access To Four Bitcoin ETFs In January

The bank will open up access to four new spot Bitcoin ETFs (exchange-traded funds) starting Jan. 5. These funds include the Bitwise Bitcoin ETF (BITB), Fidelity’s Wise Origin Bitcoin Fund (FBTC), Grayscale’s Bitcoin Mini Trust (BTC), and BlackRock’s iShares Bitcoin Trust (IBIT).

The development will enable the bank’s wealthiest clients to gain exposure to Bitcoin ETFs. Previously, these investment vehicles were only available on request. However, the bank’s more than 15,000 investment advisors will now be able to recommend the products to clients. 

The 4 Bitcoin ETFs highlighted by Bank of America are among the largest in terms of cumulative inflows since the products launched in early 2024. 

US spot Bitcoin ETF flows (Source: Farside Investors)

According to data from Farside Investors, BlackRock’s IBIT has been the most popular fund, with its cumulative inflows standing at $62.620 billion. In second place is Fidelity’s FBTC, which has seen $12.127 billion enter its reserves since launch. BITB has seen the third-highest cumulative inflows of $2.260 billion, while BTC’s cumulative inflows stand at $1.937 billion.

Other Major Financial Institutions Have Recommended A Bitcoin Allocation

Bank of America joins other financial giants that are giving clients access to crypto and that have recommended a Bitcoin allocation in investors’ portfolios. 

BlackRock, the world’s largest asset management firm, was the first institution to recommend an up to 2% Bitcoin allocation to its clients in December 2024. It said that around a 1% to 2% allocation is a “reasonable range for Bitcoin exposure.” 

The firm added that the leading crypto poses the “same share of overall portfolio risk” as a typical allocation to “the ‘magnificent 7’ group of mostly mega-cap tech stocks.” 

In June this year, asset management firm Fidelity recommended a 2% to 5% Bitcoin allocation as well, which it said was small enough to minimize risk of a Bitcoin crash, but large enough for investors to enjoy any upside from the crypto’s inflationary hedge. 

A couple of months later in October, Morgan Stanley also suggested a 2% to 4% allocation to crypto portfolios for investors and financial advisers. 

Meanwhile, Vanguard, which has around $11 trillion in assets under management and about 50 million clients, has allowed its clients to start trading crypto ETFs and mutual funds on its platform yesterday. This was a reversal in stance for the financial giant. 

Vanguard said in a statement that it will only allow clients to trade ETFs that meet regulatory standards. These include products for cryptos such as Bitcoin, Ethereum, XRP, and Solana. It also said that it will not allow for the trading of meme coin products. Additionally, the asset manager said that it will not be launching its own products.

“Vanguard Effect” Causes Bitcoin To Jump Over 7%

Bitcoin’s price has surged over 7% in the past 24 hours, data from CoinMarketCap shows. 

Bloomberg ETF analysts Eric Balchunas attributed the rise in BTC’s price and the rebound seen across the broader crypto market to the “Vanguard Effect.” 

“Bitcoin jumps 6% right around US open on first day after bitcoin ETF ban lifted. Coincidence? I think not,” he said. 

“Also $1b in IBIT volume in first 30min of trading. I knew those Vanguardians had a little degen in them, even some of the most conservative investors like to add a little hot sauce to their portfolio,” Blachunas added. 

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