In what may be a prudent move, Merrill Lynch has banned customers and financial advisors who conduct transactions for them from buying Bitcoin. This will disappoint some customers: The price of Bitcoin rose 14 times in 2017.
Individual retailers are flooding apps that make it easy to buy and sell things like Ethereum or Bitcoin. Coinbase, one of the largest US crypto exchanges, is # 2 on Apple’s finance app with more than 440,000 reviews. MyMerrill for iPhone ranks 199th with 49 ratings.
These exciting days for cryptocurrency exchanges are reminiscent of the dot-com fever when day traders betting on technology stocks inundated online brokers like E * Trade – a company that fueled the euphoria and was humiliated by its breakdown. The company’s share price surged above $ 550 per share before the bubble burst. The stock trades at around $ 50 after rising 40% last year.
Bitcoin and its cousins offer brokers and financial advisors a tremendous opportunity to attract a new generation of traders and ordinary investors. More and more people now understand that it is nearly impossible to beat the stock and bond markets and are instead putting savings into low-cost exchange-traded funds, withholding trading commissions from some brokers.
Some Merrill brokers have been discouraged from missing out on the Bitcoin craze while others admitted it may not be worth the risks, according to the Wall Street Journal (Paywall), which first covered Merrill’s decision.
Goldman Sachs is launching a digital asset trading desk, according to Bloomberg. For Cboe Holdings and CME Group, which operate derivatives markets, Bitcoin is an opportunity to sell new retail clients on futures that allow investors to speculate on asset prices at a later date. Merrill Lynch, the brokerage unit of Bank of America, also does not allow its clients to trade Bitcoin futures.
Merrill clients who bought into the Grayscale Investment Trust bitcoin fund prior to the ban are allowed to retain their positions, but not in fee-based advisory accounts, citing “aptitude and suitability standards”. The trust is supposed to track the price of the crypto asset, but has sometimes traded at a 75% premium over Bitcoin, raising the question of whether buyers are getting a fair deal on their investment.
E * Trade became something of a symbol of the dot-com euphoria, and the company has struggled to rehabilitate its image ever since. Merrill Lynch could try to show that it learned from such episodes. In the meantime, you can buy bitcoin futures on E * Trade.