Bank of America released their latest crypto report this week, as Bitcoin returns north of $50K. BofA strategists Alkesh Shah and Andrew Moss described the crypto market as “too large to ignore” and that “there could be more opportunity than skeptics expect.”
Let’s take a bird’s eye view on key findings from the 140+ page report.
Crypto, Institutionalized
As BTC hangs tough above $50K, both BofA and our team’s internal perspective on Bitcoin inflows reflect strong institutional interest.
Additionally, beyond simply traditional financial institutions, Bank of America also cites the potential for further integration of blockchain technology in daily life. “In the near future, you may use blockchain technology to unlock your phone; buy a stock, house or fraction of a Ferrari; receive a dividend; borrow, loan or save money; or even pay for gas or pizza,” the report states. Of course, many different projects are already working on tools for some of these exact use cases, and a whole lot more.
Outside of existing economies ripe for reinvigoration, the report also calls out projects and firms that are becoming inherently native to the digital asset ecosystem. There has been ample growth across both of these categories, exemplified by the below chart showing mentions of digital asset language on earnings calls:
If there is one thing that is abundantly clear, it’s that digital assets are on major corporate radars, and as BofA states – “corporations aren’t risking being left behind.” These earnings calls included companies in information technology and finance, but also included consumer staples, real estate, health care, and more.
All The Rest: DApps, NFTs, And The Regulatory Battles
It’s hard to justify bucketing the immense growth of DeFi, Dapps, and NFTs all in one place while still giving the respective categories their fair shake. Nonetheless, that’s what we’ll do here to provide a brief recap on Bank of America’s thoughts on everything that isn’t a fungible token or straightforward blockchain project.
The report soberingly acknowledges the emergence of DeFi, despite it being seen as a continual threat to traditional financial firms like Bank of America themselves. BofA described Dapps as having the potential to bring financial services to nearly 2B unbanked individuals across the globe. What many crypto advocates and loyalists have been thinking and working towards is now becoming widely acknowledged by some of the biggest traditional institutions in the game.
When it comes to NFTs, the short stroke is that the sentiment reflects digital assets in general: Bank of America is bullish. The firm describes NFTs as “changing the way creators connect with fans and receive compensation.” Indeed, as BofA acknowledges, NFTs have immense potential in demonstrating ownership without any sort of middleman fee – and that this is substantial demand for this across a wide variety of verticals.
Finally, regulatory uncertainty was cited in the report as the largest near-term risk in the firm’s view, and understandably so. That regulatory risk may be exacerbated with stablecoins, however the report noted that despite less liquid reserves (which could lead to heightened regulatory scrutiny), stablecoins are “a waiting zone between fiat currencies and digital currencies, which could further accelerate adoption of the latter.” The report adds that central bank digital currencies (CBDCs) are a “when, not if” situation.
Bank of America only began it’s crypto division earlier this year, however the banking behemoth has already released a bullish report on the crypto market. | Source: NYSE: BAC on TradingView.com
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Close The Curtain
In summary, we’re watching it all unfold in real time. The report states that over 20M U.S. adults own digital assets (roughly 14%) while an additional 19M+ plan on buying digital assets sometime this year. However, rising interests are just limited to individuals, but also live within corporations.
Furthermore, growth in ownership, interest, etc. doesn’t stop or start with Bitcoin. Bitcoin has amassed one of the largest market values on the planet, and in this case is the rising tide that is lifting altcoin boats. The BofA report dives into Twitter mention analysis, which showed that Bitcoin mentions decreased year-to-date (as of August) while many altcoin mentions increased. In the meantime, Bitcoin volatility has decreased relative to the early years, as increased adoption leads to more “diamond hands.”
Additionally, CBDCs are on the horizon. Bank of America approximates that countries encompassing roughly 90% of global GDP are reportedly exploring CBDCs. Meanwhile, engagement in NFTs and DeFi products are increasingly rapidly as well.
While acknowledging regulatory hurdles that the market will need to overcome, the BofA report doesn’t shy away from difficult topics either. Illicit activity with crypto has been a staple for bears, however BofA notes that digital assets associated with illegal activities have been cut in half compared to 2019.
In all, BofA is admittedly optimistic looking forward. As more traditional finance operations come to terms with crypto’s role across a variety of industries, adoption is only set to increase. Fasten up and hold on to your seats.
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