Bank of America’s research: The crypto industry is too large to ignore

    10 Oct 2021

    Bank of America, one of the largest banks on Wall Street, has launched its first digital asset research, looking to scale its crypto trading business.

    Led by Alkesh Shah, Global Crypto, and Digital Asset Strategist at Bank of America (BoA), the bank has released its first report on cryptocurrencies. The report titled “Digital Assets Primer: Only the first inning,” published on Monday by BoA subsidiary, BofA Securities, says that cryptocurrency’s potential is “difficult to overstate.” The report from the team adds that “digital assets are too large to ignore” and that they are “creating a whole ecosystem.”

    The announcement explains that “The primer provides an investment framework for the digital asset landscape.” The topics it covers include smart contract applications, stablecoins, central bank digital currencies (CBDCs), and non-fungible tokens (NFTs).

    Bank of America’s crypto research team was formed in July 2021. It is led by Alkesh Shah, the bank’s head of Global Cryptocurrency and Digital Asset Strategy.

    “Bitcoin is important, but the digital asset ecosystem is so much more,” Shah said. “Our research aims to explore the implications across industries including finance, technology, supply chains, social media, and gaming.”

    Head of Bank of America Global Research, Candace Browning, commented on the study: “Digital assets are transforming the way in which markets, businesses, and central banks operate. Bank of America offers a market-leading global payments platform and blockchain expertise, and the addition of digital asset research further strengthens the depth and breadth of our offerings for investors.”

    In an interview with Bloomberg TV, she pointed that the launch was due to “growing institutional interest” and the massive appetite among retail clients.

    “If you look at the number of corporates mentioning crypto on their earnings calls, that’s gone from about 17 last year to about 147 in the most recent quarter,” Browning added.

    “This is growing, this is mainstream, and it’s not just Bitcoin … this is digital assets and it’s creating a whole ecosystem of new companies, new opportunities, and new applications.”

    Martha Reyes, head of research at digital asset prime brokerage and exchange BEQUANT, commented on the research: “Banks are capitulating one by one; Bank of America is only the latest in a series of major banks to initiate coverage on digital assets or even get involved in the blockchain a la SocGen. And the regulators certainly aren’t ignoring it.”

    This BofA stance contrasts sharply with earlier reports in which Bank of America described Bitcoin as volatile, impractical, and of little use as a store of value.

    Back in March 2021, Bank of America released a report assuring that Bitcoin’s rise to $60,000 was essentially driven by speculation and not by the cryptocurrency’s inherent advantages:

    “Broadly, we find that Bitcoin has not been particularly compelling as an inflation hedge as commodities and even equities provide better correlation to inflation.

    As such, we think the main portfolio argument for holding Bitcoin is not diversification, declining volatility, or inflation protection, but rather a sheer price appreciation, a factor that depends exclusively on Bitcoin demand outpacing supply on a forward basis.”

    But after the surge, Bank of America followed in the footsteps of other banks and founded a research group dedicated exclusively to covering the area of cryptocurrencies and the blockchain industry, gradually beginning to change its treatment of these emerging businesses.

    Later in July, Bank of America has reportedly launched a new service enabling to trade of Bitcoin futures, according to Coindesk’s anonymous sources.

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