Bank of America Launches Research for ‘Too Large to Ignore’ Digital Assets

The nation’s second-largest bank by assets starts coverage three months after creating a crypto research group.

Oct 4, 2021 at 5:36 p.m. UTC
Updated Oct 4, 2021 at 7:00 p.m. UTC

Bank of America has launched digital assets research coverage nearly three months after forming a crypto group.

In its coverage, the bank highlighted companies from payment providers and banks to utilities to media giants.

Digital assets are a $2 trillion market with 200 million users, according to a Bank of America press release, and the sector is “too large to ignore,” a group of analysts led by Alkesh Shah wrote in a new research note.

“We believe crypto-based digital assets could form an entirely new asset class,” the analysts said, adding:

“Bitcoin is important with a market value of ~$900bn, but the digital asset ecosystem is so much more: tokens that act like operating systems, decentralized applications (DApps) without middlemen, stablecoins pegged to fiat currencies, central bank digital currencies (CBDCs) to replace national currencies, and non-fungible tokens (NFTs) enabling connections between creators and fans.”

Bank of America noted that venture capital investments in digital assets and blockchain technology surpassed $17 billion in the first half of 2021, “dwarfing” the $5.5 billion from the same period last year.

“This creates a new generation of companies for digital assets trading, offerings and new applications across industries, including finance, supply chain, gaming and social media. And yet we’re still in the early innings,” the analysts wrote.

The analysts see regulatory uncertainty as the only near-term risk to digital assets.

Bank of America listed stocks that it already covers, that it rates at buy or neutral and that have exposure to digital assets. Payment providers PayPal (Nasdaq: PYPL) and Coinbase (Nasdaq: COIN) top the list, followed by Signature Bank, JPMorgan Chase, Morgan Stanley and SVB Financial.

Who’s who

Utilities Black Hills Energy (Nasdaq: BKH), Exelon, NRG Energy, Public Services Enterprise Group and Vistra Corp. make the list because of their exposure to crypto mining. The analysts say Black Hills is the utility with the “most advanced digital asset regulatory strategy that could potentially be earnings accretive.”

Bank of America highlighted Fox (Nasdaq: FOX) as the first major media company to enter the NFT market with its $100 million Blockchain Creative Labs fund. Disney, iHeartMedia and Warner Music were also included for their current and potential NFT projects.

Chemicals company Archer-Daniels-Midland (NYSE: ADM) made the list because it uses blockchain technology to process transactions in global agricultural trade.

DraftKings (Nasdaq: DKNG) was the only gambling company; it operates an NFT marketplace in partnership with Tom Brady’s Autograph.

Digital Realty Trust (NYSE: DLR) and Equinix (Nasdaq: EQIX) represent data centers. Bank of America said those companies are in a good position to “capitalize from the digital asset mining migration from China to North America.”

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