Bank of America (BofA) has officially endorsed an allocation of 1% to 4% in crypto for its wealth management clients, marking a significant shift in how Wall Street approaches digital assets.
However, the change comes at a challenging time for retail investors, who now hold the majority of the Bitcoin ETF supply and are absorbing significant losses in the market.
BofA paves the way for mainstream crypto exposure
Yahoo Finance reported on Tuesday that Bank of America will begin coverage of four Bitcoin ETFs, including BITB, FBTC, Grayscale Mini Trust, and IBIT, starting January 5, 2026.
This will allow more than 15,000 advisors from Merrill, Private Bank, and Merrill Edge to proactively recommend regulated crypto products for the first time.
"For investors with a strong interest in thematic innovation and comfort with high volatility, a modest allocation of 1% to 4% in digital assets may be appropriate," said Chris Hyzy, CIO of Bank of America Private Bank.
He added that the guidance emphasizes "regulated vehicles, careful allocation, and a clear understanding of both opportunities and risks."
Previously, clients could only access crypto ETFs upon request, a barrier that left many retail investors seeking exposure elsewhere.
The update reflects "the growing client demand for access to digital assets," said Nancy Fahmy, head of the investment solutions group at BofA.
Wall Street consensus is forming quickly
BofA's guidance accompanies a broader institutional shift:
Morgan Stanley recommends allocations of 2% to 4% in crypto.
BlackRock endorses 1% to 2%.
Fidelity suggests 2% to 5%, and up to 7.5% for younger investors.
Vanguard will begin allowing selected crypto ETFs on its platform — a significant philosophical reversal.
SoFi, Schwab, JPMorgan, and others now provide some form of access to ETFs or crypto-linked services.
These changes align with a broad reversal of policies under the Trump administration, which dismantled several restrictions imposed by the Biden administration on banks dealing with digital assets.
Many companies are now awaiting clarity from Congress on custody, direct trading, and broader crypto services on platforms.
Retail suffers more as markets operate in decline
The adoption momentum on Wall Street is significant. Bitcoin has fallen about 33% from its peak of $126,000, and has seen a decline of about 10% this year, even as the S&P 500 rises 15%.
According to Bernstein, retail investors hold approximately 75% of spot Bitcoin ETF assets, making them the most exposed to price volatility.
Meanwhile, institutional ownership increased from 20% to 28%, reflecting a strategic rotation towards Bitcoin and Ethereum as retail investors withdraw.
New ETFs are seeing a significant drop
The recent wave of altcoin-focused ETFs has performed even worse:
All 11 new products are in the red, affected by a $600 billion drop in Bitcoin's market value since October.
A small-cap index of the 50 smallest crypto assets has fallen to its lowest level since November 2020.
Performance: SSK –15%, BSOL –30%, DOJE –40%, with new baskets of XRP and the top 10 coins also unfavorable.
In this context, concerns persist about how the potential LINK ETF could perform.
"This seems to be a combination of retail traders being hurt and issuers missing the timing of entry," reported Bloomberg, citing Fiona Cincotta, senior market analyst at City Index, warning that ETF packages may give smaller investors "a false sense of security."
BofA's initiative signals that the institutional era of crypto is accelerating, bringing regulated exposure to millions of mainstream clients.
However, with retail still absorbing the largest losses and ownership quickly shifting to ETF investors, market volatility may remain high.
The next catalyst is likely to come from Washington, where pending legislation could determine how deeply banks can integrate cryptocurrencies into their core services.
The article Bank of America supports a 4% allocation in crypto while retail investors are facing losses was first seen on BeInCrypto Brasil.
