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Merrill Lynch Bans Clients from Investing in Bitcoin Fund

Merrill Lynch, the brokerage arm of Bank of America, has blocked financial advisers and clients from trading in bitcoin-related investments.

The ban extends to clients trading in Grayscale’s Bitcoin Investment Trust, a fund led by bitcoin entrepreneur Barry Silbert. The decision to block access to the fund was due to concerns about the “suitability and eligibility standards of this product,” an internal memo circulated to approximately 17,000 advisers states.

According to the Wall Street Journal, the bank has extended a ban on recently launched bitcoin futures contracts. A WSJ source said Merrill Lynch put the policy in place on Dec. 8, just two days prior to the launch of bitcoin futures by CBOE.

The source also said that existing bitcoin funds cannot be held in fee-based advisory accounts, but can be maintained in brokerage accounts, WSJ adds.

Silbert, a former Wall Street investment banker, told Reuters:

“We look forward to speaking with Merrill Lynch and addressing any questions or concerns they have about the Bitcoin Investment Trust. We are unaware of any similar policies at other brokerage firms.”

The Futures Industry Association (FIA), published an open letter to the CFTC before the launch of bitcoin futures, causing concern over the process in which cryptocurrency futures have come to market. Big banks and brokers including JPMorgan Chase, Citigroup, and Royal Bank of Canada have told clients regarding the denial of access to bitcoin futures, the WSJ report says.

Disclosure: Grayscale Investments is a subsidiary of Digital Currency Group, CoinDesk’s parent company.

Merrill Lynch image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

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Bank of America Report: Bitcoin's True Value 'Impossible to Assess'

A potential move by global brokerages to offer products around cryptocurrencies could have a big impact on the wider market, analysts at Bank of America Merrill Lynch wrote.

In an Oct. 16 research note entitled “Introducing cryptocurrencies – what are they good for?”, the analysts tackle bitcoin as well as other cryptocurrencies such as ethereum and XRP. The note both covers the basics of the market and dives more specifically into the growing galaxy of open blockchain networks in operation today.

Notably, the report touches on the possible factors that could shape the cryptocurrency market’s future progression – including financial products based on the tech.

On this point, the bank’s analysts suggest that a move by brokerages to begin offering such services to their clients could affect both the overall liquidity of the market as well as the market capitalization for the relevant cryptocurrencies.

“The coin universe is dynamic and innovative and volatile; while a true value for cryptocurrencies may be impossible to assess, one factor which we believe could affect their liquidity and market capitalisation would be if one or more global broker/dealers decided to offer institutional-like products,” they wrote.

The past year has seen a number of high-profile efforts to build cryptocurrency-tied investment products, and firms like CBOE have described plans to take part in what is still a nascent ecosystem. Even so, regulators in the U.S. have reacted coolly to such proposals thus far.

And according to the Bank of America analysts, it remains far from certain how the market will develop in the months to come.

“[A]t present, these impacts are too far off, and too unpredictable, to form part of an estimate or an investment recommendation,” they wrote.

Image Credit: Roman Tiraspolsky / Shutterstock.com

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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Herd on the Street? Bank of America Survey Calls Bitcoin 'Most Crowded Trade'

Buying bitcoin is now the most crowded trade in the financial markets.

According to a recent Bank of America survey, 26 percent of 181 fund managers polled (who oversee a combined $629 billion in assets) cited bitcoin as the most crowded trade. The second most popular choice for the distinction was going long on the Nasdaq composite index, picked by 22 percent of respondents, followed by shorting the dollar, cited by 21 percent.

Notably, it was the first time the cryptocurrency has appeared on the list.

The upshot of the news is that, with so many investors having piled into the market, it could portend an eventual stampede to sell.

The Office of Financial Research, a bureau of the U.S. Treasury created after the 2008 financial crisis, defines a crowded trade as “a trade in which the market participants have large and similar positions, creating the risk that there will be insufficient liquidity should market participants seek to unwind their positions simultaneously.”

“Such concentration creates fragility in the financial system,” the office said in a report published in 2012, back when few if any institutional investors had probably even heard of bitcoin.

That said, the market conditions may be having short-term benefits. Bitcoin has roughly quadrupled in value since the beginning of this year. At press time, its price was down over 7 percent for the day at $3,843, according to CoinDesk’s Bitcoin Price Index.

Cattle image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [email protected].

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.