Retail Takes Biggest Losses As Wall Street Goes All-In on Crypto

Bank of America (BofA) has officially endorsed a 1%–4% allocation to crypto for its wealth management clients, marking a landmark shift in how Wall Street approaches digital assets.

However, the move arrives at a challenging time for retail investors, who now hold the majority of Bitcoin ETF supply and are absorbing significant market losses.

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BofA Opens the Door to Mainstream Crypto Exposure

Yahoo Finance reported on Tuesday that Bank of America will begin CIO coverage of four Bitcoin ETFs, including BITB, FBTC, Grayscale Mini Trust, and IBIT, starting January 5, 2026.

It would enable more than 15,000 advisers across Merrill, the Private Bank, and Merrill Edge to recommend regulated crypto products for the first time proactively.

“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,” said Chris Hyzy, CIO of Bank of America Private Bank.

He added that guidance emphasizes “regulated vehicles, thoughtful allocation, and a clear understanding of both the opportunities and risks.”

Previously, clients could access crypto ETFs only by request, a barrier that left many retail investors searching for exposure elsewhere.

The update “reflects growing client demand for access to digital assets,” said Nancy Fahmy, head of BofA’s investment solutions group.

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Wall Street Consensus Is Quickly Forming

BofA’s guidance follows a broader institutional shift:

• Morgan Stanley recommends 2%–4% crypto allocations.
• BlackRock endorses 1%–2%.
• Fidelity suggests 2%–5%, and up to 7.5% for younger investors.
• Vanguard will start allowing select crypto ETFs on its platform — a major philosophical reversal.
• SoFi, Schwab, JPMorgan, and others now provide some form of ETF access or crypto-linked services.

These changes align with a sweeping policy reversal under the Trump administration, which dismantled several constraints imposed by the Biden administration on banks engaging with digital assets.

Many firms now await Congressional clarity on custody, direct trading, and broader on-platform crypto services.

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Retail Suffers the Most as Markets Turn Red

The timing of Wall Street’s adoption is striking. Bitcoin has dropped nearly 33% from its $126,000 peak, and is down about 10% YTD, even as the S&P 500 climbs 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 has increased from 20% to 28%, reflecting a strategic rotation into Bitcoin and Ethereum as retail investors capitulate.

New ETF Launches Deep in the Red

The recent wave of altcoin-heavy ETFs has fared even worse:

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• All 11 new products are in the red, hit by a $600 billion wipeout in Bitcoin’s market cap since October.
• A small-cap index of the bottom 50 crypto assets has fallen to its lowest level since November 2020.
• Performance: SSK –15%, BSOL –30%, DOJE –40%, with new XRP and top-10 baskets also underwater.

Against this backdrop, concerns linger about how the prospective LINK ETF could fare.

“This appears to be a combination of retail traders getting burned and issuers mistiming their entry,” Bloomberg reported, citing Fiona Cincotta, senior market analyst at City Index, warning that ETF wrappers can give smaller investors “a false sense of security.”

BofA’s move signals that the institutional era of crypto is accelerating, bringing regulated exposure to millions of mainstream clients.

However, with retail still absorbing the sharpest losses and ownership quickly shifting toward ETF-based holders, market volatility may remain elevated.

The next catalyst is likely to come from Washington, where pending legislation could determine how deeply banks can integrate cryptocurrency into their core services.