Bank of America Says Cryptocurrencies Continue to Act as Risk Assets

Ether continues to slide as investors shift to a wait-and-see approach regarding future upgrades, the bank said in a research report.

AccessTimeIconSep 26, 2022 at 8:17 a.m. UTC
Updated May 11, 2023 at 4:20 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Digital assets continue to act as risk assets, falling as global interest rates rise, Bank of America (BAC) said in a research report Friday.

Still, positive signs of an eventual recovery include stablecoin inflows. Stablecoins are a type of cryptocurrency whose value is pegged to another asset, such as the U.S. dollar or gold.

Last week these inflows jumped to $490 million, 58% higher than the previous week, the report said, as “real-world use cases like payments/remittances are adopted and real-world data providers like decentralized oracle networks increase functionality.”

The four largest stablecoins had exchange net inflows for the third week in a row, the report said, noting that large Binance USD (BUSD) inflows/USD coin (USDC) outflows could be the result of investors “preemptively rotating” into BUSD from USDC to avoid disruptions following Binance’s decision to auto convert some stablecoins into its own stablecoin.

Bank of America expects regulatory clarity to support decentralized finance adoption. DeFi is an umbrella term used for lending, trading and other financial activities carried out on a blockchain without the use of traditional intermediaries.

The jump in ether’s (ETH) price from mid-July to mid-August continues to reverse as investors digest that the Ethereum blockchain’s switch to proof-of-stake (PoS) does not fix scalability concerns or high fees, and these investors shift to a “wait-and-see approach regarding future upgrades,” the note said.

The transition from proof-of-work (PoW) to a more environmentally friendly proof-of-stake consensus mechanism is the first of five upgrades for the Ethereum blockchain, a process that was called the Merge.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Author placeholder image

Will Canny is CoinDesk's finance reporter.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.