One of the world’s largest financial institutions, Bank Of America (BofA) has caught crypto bubble fever. A new report from the second-largest U.S. bank by assets ($2.32 trillion) gives a significant boost to the crypto sphere. BofA says it’s bullish on Ethereum, DeFi, and even risky NFTs.
DeFi, or decentralized finance, is a blockchain-based form of finance that does not depend on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments. DeFi instead uses smart contracts on the blockchain, the most common being Ethereum — a decentralized, open-source blockchain. Nonfungible tokens or NFTs are unique digital assets that represent ownership of real-world items such as art, video clips, music and even real estate.
BofA thinks blockchain is the most exciting new market in a long time, according to its bullish new report on blockchain and digital assets. The comprehensive report examines cryptocurrencies, DeFi, dapps, NFTs, stablecoins, and more, Tech Story reported.
Decentralized applications (dapps) use Ethereum to disrupt business models or invent new ones. Stablecoins are a type of crypto pegged to an asset such as the U.S. dollar that doesn’t change much in value.
The report marked the beginning of BofA analysts’ coverage of the crypto market. The bank “launched its digital asset research with the publication of a report entitled ‘Digital Assets Primer: Only the first inning,’ led by Alkesh Shah, head of Global Cryptocurrency and Digital Asset Strategy,” according to a BOA press release.
“Bitcoin is important,” Shah said, “but the digital asset ecosystem is so much more. Our research aims to explore the implications across industries including finance, technology, supply chains, social media and gaming.”
Being bullish on bitcoin is a change from BofA’s previous stance on blockchain and digital assets, which gave mixed messages on crypto in the past—including slamming Bitcoin as “slow” and “impractical” in a March research note, Decrypt reported.
Now, however, BofA’s global research division is highly optimistic about the future of the crypto industry, describing itself as “bullish” about the overall ecosystem.
BofA’s new digital asset primer described blockchain as “the most exciting new market in years … We believe crypto-based digital assets could form an entirely new asset class … Bitcoin is important with a market value of ~$900 billion, but the digital asset ecosystem is so much more.”
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The report added, “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.”
BofA has more than $17 billion worth of venture capital investments in digital assets and blockchain firms in the first half of 2021 alone, compared to $5.5 billion across all of 2020, Decrypt reported.
The BofA report was somewhat caustic on NFTs, suggesting that sky-high asking prices of NFTs are of concern.
“Simple images like a black background with a few words of text make us concerned that there are heightened risks in this segment that need to be fully understood before NFTs can achieve true adoption,” the company wrote.