NEW YORK (Realist English). Nearly half of all current cryptocurrency investors have suffered “notable losses,” according to a new survey of financial advisors whose clients hold digital assets. Yet despite the poor track record, Wall Street firms are increasingly encouraging small allocations to crypto — a reversal from years of caution.
This week, Bank of America said clients of Merrill and the Private Bank will be advised starting in January to take limited positions in crypto assets, capped at 4% of their portfolios. The move follows similar decisions by JPMorgan, Morgan Stanley, Charles Schwab, Fidelity, and even Vanguard, which will now allow trading of crypto mutual funds and ETFs on its platform.
The shift raises a question many advisors dread: What happens when the next crypto crash arrives?
Why are advisors changing course?
For years, most financial advisors rejected bitcoin, ethereum and other cryptocurrencies, citing extreme volatility and a lack of regulatory clarity. That climate has changed.
Rob Burgess of Financial Planning says politics and regulation are driving the shift:
- David Sacks, now seen as the administration’s “crypto czar,” is openly supportive of digital assets.
- President Donald Trump, once skeptical, has become strongly pro-crypto in his second term.
- Regulatory approval of bitcoin and ethereum ETFs 18 months ago gave the industry an air of legitimacy.
“That was a huge step in legitimizing it for a lot of people,” Burgess told Yahoo Finance.
Investors face a history of violent downturns
Since bitcoin’s creation in 2009, the market has endured three severe “crypto winters,” notes Amy C. Arnott of Morningstar:
- 2013–2015: bitcoin fell 75%
- 2018: an 83% crash
- 2021–2022: another 73% decline
Despite this, long-term gains have been dramatic: priced in the hundreds of dollars in 2016, bitcoin surged into the hundreds of thousands this October before a sharp drop below $100,000 erased gains for the year.
“That $100,000 level is a psychological threshold,” Arnott said. “People started getting nervous once it fell below that.”
Morningstar does not assign a fair value to cryptocurrencies, noting they lack intrinsic value and cannot be assessed like stocks or bonds.
So what should investors expect?
Morningstar offers no formal recommendation on crypto, but advisors across the industry emphasise caution:
- Keep allocations very small — often 2% or less of a total portfolio
- Be prepared for 50%+ drawdowns
- Recognise that crypto remains highly speculative
“Bitcoin is the biggest and most well-known cryptocurrency, but many others can be even riskier,” Arnott said. “You need to be willing to live with huge performance swings.”
As traditional financial institutions open the door to crypto, the question for investors is not whether volatility will return — but how much of it they are willing to endure.