Bank of America Endorses Crypto

Wall Street's Portfolio Playbook Converges on 1-4% Digital Asset Allocation

Bank of America became the latest major financial institution to formally endorse crypto allocations, announcing January 5, 2026 as the start date for wealth advisors across Merrill, Bank of America Private Bank, and Merrill Edge to recommend 1-4% portfolio positions in digital assets. The move arrives one day after Vanguard, the world's second-largest asset manager with $11 trillion in assets, reversed its longstanding anti-crypto stance to allow ETF and mutual fund trading on its platform starting December 2, 2025.

What matters here is the remarkable consistency of allocation guidance emerging across Wall Street. Morgan Stanley's Global Investment Committee recommended 2-4% crypto allocations in October 2025, guiding 16,000 advisors who manage $2 trillion in client wealth. The convergence is a strong signal that institutional wealth management is developing a shared framework for treating digital assets as a modest but legitimate portfolio component.

The Advisor Unlock

Bank of America's 15,000+ wealth advisors were previously unable to recommend crypto products, with access limited to client-initiated requests only. Starting January 5, coverage will 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).

"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," stated Chris Hyzy, Bank of America Private Bank's Chief Investment Officer. The lower end targets conservative profiles while 4% serves high-risk-tolerance investors—a risk-based segmentation approach that mirrors Morgan Stanley's October guidance almost exactly.

The competitive pressure is mounting. Wells Fargo, Goldman Sachs, and UBS remain among the holdouts not yet offering unrestricted crypto ETF access, but Bitwise CIO Matt Hougan predicted in May 2025 that all four major wirehouses (Merrill Lynch, Morgan Stanley, Wells Fargo, and UBS) would offer Bitcoin ETFs by year-end. Bank of America's move puts direct pressure on these remaining firms.

Vanguard's Calculated Reversal

Vanguard's December 2 policy shift allows ETFs and mutual funds holding Bitcoin, Ether, XRP, and Solana to trade on its platform for more than 50 million brokerage customers. The timing is notable: this comes despite the crypto market shedding more than $1 trillion in value since early October, when Bitcoin peaked above $126,000 before falling to the mid-$80,000s.

"Cryptocurrency ETFs and mutual funds have been tested through periods of market volatility, performing as designed while maintaining liquidity," Andrew Kadjeski, Vanguard's head of brokerage and investments, stated. The firm emphasized it has no plans to create its own crypto products and will exclude meme coin funds, treating crypto ETFs similarly to other non-core assets like gold.

The shift follows the May 2025 appointment of Salim Ramji, a former BlackRock executive and blockchain advocate, as Vanguard's CEO—more than a year before this policy reversal materialized. The delay suggests institutional friction between leadership vision and organizational culture, resolved ultimately by persistent client demand rather than executive fiat alone.

The Allocation Framework Taking Shape

The 1-4% range isn't arbitrary—it reflects wealth management's risk management orthodoxy applied to a new asset class:

Morgan Stanley's framework allocates up to 4% for "opportunistic growth" portfolios seeking short-term market opportunities, 3% for "market growth" with moderate-to-aggressive risk tolerance, 2% for "balanced growth" portfolios mixing capital appreciation and income, and zero for conservative wealth preservation strategies.

The approach treats crypto as a satellite holding rather than core allocation, sized to allow meaningful exposure during bull runs while preventing portfolio-level volatility during drawdowns. Morgan Stanley emphasized quarterly or at minimum annual rebalancing to prevent swelling allocations that could add unnecessary portfolio risk—critical guidance given Bitcoin's historical tendency toward explosive upside followed by 70%+ corrections.

What This Means for Capital Flows

The math on potential inflows is substantial but shouldn't be exaggerated. Bank of America manages over $3 trillion across its wealth divisions. A 2% average allocation across even a fraction of that asset base implies tens of billions in potential crypto exposure. BlackRock's IBIT, the largest Bitcoin ETF, currently holds approximately $70 billion, down from roughly $100 billion two months ago.

However, two factors complicate the bullish narrative. First, these are maximum allocation guidelines, not mandates—actual average allocations will trend significantly lower as conservative clients opt for zero exposure. Second, Bitcoin has fallen approximately 30% since hitting a record high above $126,000 in early October, meaning these policy changes arrive during a meaningful drawdown rather than euphoric rally.

The institutional adoption story isn't about timing market tops—it's about establishing infrastructure and guidelines that persist through cycles. Morgan Stanley is planning to roll out crypto trading for E-Trade clients in early 2026, potentially unlocking access to $1.3 trillion in trading volume, working with crypto infrastructure firm Zerohash to provide liquidity, custody, and settlement.

The Holdout Problem

Wells Fargo, Goldman Sachs, and UBS face mounting pressure as peers move forward with crypto offerings. The competitive dynamics are clear: advisors at firms without crypto access will face client pressure as peers at BofA, Morgan Stanley, Fidelity, and Schwab can offer regulated exposure. Talent retention becomes a factor when advisors at restrictive firms lose clients or deals to competitors with fuller product suites.

The regulatory clarity provided by the GENIUS Act in 2025 removed a key excuse for inaction. What remains is organizational inertia, risk aversion, and—in some cases—philosophical opposition to digital assets that becomes harder to justify as client demand persists and peer institutions establish track records with regulated products.

Bank of America's move, combined with Vanguard's reversal, reduces the number of credible holdouts substantially.