Bank of America Backs 4% Crypto Allocation as Retail Takes Losses

Core Insights - Bank of America (BofA) has officially endorsed a 1%–4% allocation to crypto for its wealth management clients, indicating a significant shift in Wall Street's approach to digital assets [1][3] - The endorsement comes at a challenging time for retail investors, who currently hold the majority of Bitcoin ETF supply and are facing substantial market losses [1][8] Group 1: BofA's Crypto Strategy - BofA will begin CIO coverage of four Bitcoin ETFs starting January 5, 2026, allowing over 15,000 advisers to recommend regulated crypto products proactively [2] - Chris Hyzy, CIO of Bank of America Private Bank, stated that a modest allocation of 1% to 4% in digital assets could be suitable for investors comfortable with volatility [3] - Nancy Fahmy, head of BofA's investment solutions group, noted that the update reflects growing client demand for access to digital assets [4] Group 2: Industry Trends - BofA's guidance aligns with a broader institutional shift, following a policy reversal that has eased constraints on banks engaging with digital assets [5] - Other financial institutions are also recommending crypto allocations, with Morgan Stanley suggesting 2%–4%, BlackRock endorsing 1%–2%, and Fidelity proposing 2%–5% [7] - The timing of Wall Street's adoption is notable, as Bitcoin has dropped nearly 33% from its peak, while retail investors hold approximately 75% of spot Bitcoin ETF assets, making them highly exposed to price volatility [8]