Bank of America has allowed its 15,000 advisers to consider bitcoin ETF allocations for its wealth management clients for the first time this month.
Having been flagged in December, the move came into effect on Monday 5 January.
In an update for investment advisers at Merrill Lynch, it said advisers will be allowed to consider four bitcoin ETFs for between 1-4 per cent allocations for its wealth management portfolios depending on their risk tolerance.
It is understood the four ETFs are Bitwise Bitcoin ETF, Fidelity Wise Origin Bitcoin Fund, Grayscale Bitcoin Mini Trust and BlackRock iShares Bitcoin Trust.
This will apply to Merrill Lynch, Bank of America Private Bank and Merrill Edge platforms.
Prior to this, crypto vehicles could only be considered if the asset was raised proactively by the client.
However, the update warned advisers of numerous risks associated with the assets including its highly speculative nature, media influence, volatile pricing and concentrated ownership.
“Crypto assets are highly speculative and have been in existence for only a short period of time. A significant portion of the demand for crypto assets is generated by speculators and investors seeking to profit from short-term holdings. Media headlines, tweets, or influencers’ opinions can significantly influence performance given the speculative nature of cryptocurrency. Historical prices of crypto assets have been extremely volatile.
“Crypto asset prices can decline rapidly, and investors can lose their entire investment within a short period. Some crypto assets have concentrated ownership or a number of large holders, who may cause unexpected price declines by selling or transferring their holdings without warning.”
In Australia, ETF provider Global X has stated regulatory improvements and market infrastructure changes have made crypto more accessible for financial advisers.
“As regulatory clarity improves and market infrastructure matures, crypto ETFs are likely to remain a key access point for investors seeking diversification, hedging against fiat currency, or asymmetric growth potential.
“We continue to see strong and growing interest from investors and advisers as crypto becomes more widely accepted as an alternative asset class.”
Meanwhile, CoreData found the most-common advisory questions from crypto investors were top areas were tax strategies and regulatory compliance (59 per cent), portfolio allocation and diversification (55 per cent) and yield generation and passive income strategies (50 per cent).
Bank of America’s move follows a move by Morgan Stanley back in August 2024 to allow advisers to consider the BlackRock iShares Bitcoin Trust and the Fidelity Wise Origin Bitcoin Fund for clients.
However, at the time, it was not a universal move for all clients as Morgan Stanley imposed limits such as the products only being recommended to clients with a net worth of US$1.5 million or above ($2.3 million), an aggressive risk tolerance, and a willingness to make speculative investments.
Morgan Stanley has since updated this, as of 1 October, to 3 per cent for a Balanced Growth or Market Growth risk profile and 4 per cent for an Opportunistic Growth profile.
These allocations took into account the potential for greater drawdowns, swelling allocation levels, rising risk and higher volatility.
“The global investment committee recommends financial advisers and clients rebalance multi-asset portfolios with cryptocurrency allocations on a regular, periodic basis; preferably quarterly or at least annually. Such rebalancing will dampen the potential for swelling positions which could mean outsized portfolio-level volatility and cryptocurrency risk contributions in periods of macro and market stress.”
