Bank of America Recommends Bitcoin Allocation as Major Institutions Embrace Crypto Assets

Bank of America, the second-largest bank in the United States, has recommended that its wealth management clients consider allocating between 1% and 4% of their portfolios to Bitcoin, marking a significant shift in institutional attitudes toward cryptocurrency investments.

Major Bank Opens Access to Bitcoin ETFs

Starting January 5, Bank of America will provide access to four spot Bitcoin exchange-traded funds through its Merrill, Bank of America Private Bank, and Merrill Edge platforms ^[2]. The approved ETFs include Bitwise Bitcoin ETF (BITB), Fidelity's Wise Origin Bitcoin Fund (FBTC), Grayscale's Bitcoin Mini Trust (BTC), and BlackRock's iShares Bitcoin Trust (IBIT) ^[2].

"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 ^[2].

The move will enable the bank's more than 15,000 investment advisors to actively recommend these products to clients, rather than making them available only upon request ^[2].

Growing Institutional Consensus on Crypto Allocation

Bank of America joins a growing list of financial giants embracing cryptocurrency investments. BlackRock, the world's largest asset management firm, was first to recommend an up to 2% Bitcoin allocation to clients in December 2024, stating that a 1% to 2% allocation represents a "reasonable range for Bitcoin exposure" ^[2].

Fidelity recommended a 2% to 5% Bitcoin allocation in June, arguing the range was small enough to minimize crash risk while allowing investors to benefit from Bitcoin's potential as an inflation hedge ^[2]. Morgan Stanley followed in October with a 2% to 4% allocation suggestion for crypto portfolios ^[2].

Most notably, Vanguard reversed its previous stance and began allowing its 50 million clients to trade crypto ETFs and mutual funds, including products for Bitcoin, Ethereum, XRP, and Solana ^[2]. The asset manager, which oversees approximately $11 trillion, stated it would only permit trading of ETFs meeting regulatory standards while declining to launch its own crypto products ^[2].

Market Response and Price Movement

Bloomberg ETF analyst Eric Balchunas attributed a 7% surge in Bitcoin's price to the "Vanguard Effect," noting the cryptocurrency jumped 6% around the U.S. market open on the first day after Vanguard lifted its Bitcoin ETF restrictions ^[2]. BlackRock's IBIT recorded $1 billion in trading volume within the first 30 minutes of trading ^[2].

Fed Policy Outlook Remains Uncertain

Despite institutional adoption momentum, investor Kevin O'Leary expressed skepticism about near-term catalysts for significant Bitcoin price appreciation. O'Leary pushed back against expectations of a December Federal Reserve rate cut, citing persistent inflation concerns ^[1].

"I'm not investing as if the Fed is going to cut rates. So I just don't see it. I think there are lots of reasons why they might not," O'Leary said, pointing to inflation in the system and the impact of tariffs on input costs ^[1].

While market participants have assigned 89.2% odds to a Fed rate cut in December according to CME's FedWatch Tool ^[1], O'Leary predicted Bitcoin would "drift within 5% of where it is now, in either direction" without seeing "a lot of upside catalyst" ^[1].

The convergence of major financial institutions recommending modest Bitcoin allocations signals a maturing cryptocurrency market, even as debates continue over monetary policy impacts and short-term price movements.