Bank of America Supports 1%-4% Crypto Allocation as Retail Investors Face Losses

Bank of America (BofA) has officially recommended that its wealth management clients allocate between 1% and 4% of their portfolios to cryptocurrency, signaling a significant shift in Wall Street's approach to digital assets. This endorsement arrives at a tough time for retail investors, who currently hold most of the Bitcoin ETF supply and are experiencing considerable market losses.

Key Takeaways

Bank of America has endorsed a 1%-4% allocation to cryptocurrency for its wealth management clients.
Starting in January 2026, BofA will cover four Bitcoin ETFs, allowing advisers to recommend these products proactively.
The move reflects growing demand for crypto investment from clients, following shifts in institutional strategies.
Retail investors currently face significant exposure and losses in the market, while institutional ownership of crypto assets is rising.

By understanding these dynamics, investors can better navigate the evolving landscape of cryptocurrency and its integration into traditional finance.

BofA's Leadership in Crypto Investment

Yahoo Finance reported on Tuesday that starting January 5, 2026, Bank of America will provide Chief Investment Officer (CIO) coverage for four Bitcoin ETFs: BITB, FBTC, Grayscale Mini Trust, and IBIT. This development will allow over 15,000 financial advisers at Merrill, the Private Bank, and Merrill Edge to recommend regulated crypto products proactively for the first time.

Chris Hyzy, CIO of Bank of America Private Bank, noted, “For investors keen on thematic innovation and comfortable with increased volatility, a modest 1% to 4% allocation in digital assets could be suitable.” He emphasized the importance of “regulated vehicles, careful allocation, and a comprehensive understanding of both the opportunities and risks involved.”

Previously, clients could only access crypto ETFs upon request, creating a barrier that left many retail investors seeking exposure elsewhere. Nancy Fahmy, head of BofA’s investment solutions group, stated that this update reflects a growing demand among clients for access to digital assets.

BofA's new guidance coincides with a broader shift in institutional investment strategy. This update follows a policy reversal initiated during the Trump administration, which relaxed some restrictions that the Biden administration had placed on banks dealing with digital assets. Currently, many firms are waiting for Congress to provide clarity about custody, direct trading, and additional crypto services.

The timing of Wall Street’s shift is notable, with Bitcoin having declined nearly 33% from its peak of $126,000 and experiencing a 10% drop year-to-date, while the S&P 500 has risen by 15%. According to Bernstein, retail investors hold approximately 75% of the assets in spot Bitcoin ETFs, making them highly susceptible to price fluctuations. In contrast, institutional ownership has increased from 20% to 28%, indicating a strategic shift toward Bitcoin and Ethereum as retail investors face losses.

Challenges for New ETFs Amid Market Volatility

New altcoin-heavy ETFs are also encountering difficulties. Amid this environment, there are concerns about how a potential LINK ETF might perform. Fiona Cincotta, a senior market analyst at City Index, cautioned that "retail traders are getting burned, and issuers might be misjudging their entry time," pointing out that ETF wrappers can create an illusion of security for smaller investors.

BofA’s move indicates that the institutional phase of cryptocurrency investment is rapidly advancing, potentially providing regulated exposure to millions of mainstream investors. However, with retail investors still facing significant losses and ownership increasingly shifting toward ETF holders, heightened market volatility may persist.

The next major developments are likely to emerge from Washington, where upcoming legislation could shape how banks integrate cryptocurrency into their core services.