The white -knuckle ride that was bitcoin in 2017 cast a spell over some investors, sent others screaming into the night, and left the giants of wealth management cold. They are sitting this one out despite the fact that bitcoin ended 2017 with a gain of 1,375%.
On December 8, just two days before the launch of the first US bitcoin futures, Merrill Lynch put into place a policy blocking clients and financial advisors who trade on their behalf from buying bitcoin.
'As of market close December 8, 2017, the Grayscale Bitcoin Investment Trust (GBIT) was closed for client purchase. While new orders will be blocked in Private Client Order Entry and other trading applications, clients still have the opportunity to sell existing positions. The decision to close GBTC to new purchases is driven by concerns pertaining to suitability and eligibility standards of this product,' read an internal memo.
'In addition, GBTC can no longer be purchased or held in any accounts enrolled in an investment advisory program, including the Merrill Lynch Investment Advisory Program, any legacy programs and our dual-contract programs.'
A person familiar with the matter said the move means Merrill's 17,000 advisors may not try to sell bitcoin-related investments and may not make trades in the Grayscale Investment Trust bitcoin fund. The person said positions in the bitcoin fund can remain in brokerage accounts but not in fee-based accounts.
Wall Street's skepticism about digital currencies is further borne out by the other big three wirehouses, none of which allow their advisors to trade the cryptocurrency in any type of account.
A person familiar with the UBS policy said the decision not to offer access to bitcoin was made from the time it came into existence. 'With all the palaver going on, there had been a lot of client questions about how to take advantage of this. But the research is bearish. It points to the risk, the illiquidity, the giant volatility, the difficulty of trading directly.'
As for the app-based access to bitcoin, the person said this presents a huge problem for how to protect against hackers. 'If someone succeeds in owning bitcoin they have two significant risks of losing everything. One is if you lose your own private key. There's no way to recover, no helpdesk. The other is if you get hacked, someone gets your key and then they can walk off with your stuff.'
A spokesperson at Wells Fargo said the firm has not offered trading of it in any available form. Trading in Grayscale has been blocked since May for online clients and 'had been blocked much earlier' for clients working through financial advisors.
Morgan Stanley issued only a terse statement saying: 'Our financial advisors currently do not offer our wealth management clients access to securities or derivatives linked to the price of bitcoin or other digital currencies.'
The person familiar with the UBS situation added that the wirehouse is keeping an eye on bitcoin to see if there is 'eventual reputable repair done to make it a real currency ... but it seems like that is a long way off.'