Meryll Lynch Bans Cryptocurrency Trading to Protect Investors

The beginning of January, Merrill Lynch, the brokerage arm of Bank of American, banned its financial advisors from trading bitcoin for their clients. In light of the value surge of bitcoin throughout 2017, this decision has some people asking, ‘why’? According to Merrill Lynch, bitcoin is simply “too much of a risk” for investors.

This decision to block access to the fund was made after concerns were pointed out in an internal memo over the “suitability and eligibility standards of this product”. Meryll Lynch has not only banned its clients from trading bitcoin future, but bitcoin investment trusts as well.

Fox Business financial contributor Cheryl Casone explained, “Merrill says that investing in bitcoin is just too much of a risk. Merrill’s financial advisors can no longer suggest bitcoin investments or make trade for their clients in the Greyscale’s Bitcoin Investment fund.”

Days after this announcement, Harvest Volatility Management’s Dennis Davitt, shared that bitcoin’s price had dropped by 13 percent, giving a stern warning to investors that cryptocurrency with the most leverage investment is the one set to fail. So, what has caused the “unstoppable” bitcoin to fall into such an unfavorable light? Why are investors backing away, and a label of “high-risk” being used?

  • Refusal to Accept Bitcoin. While a handful of brand-name businesses have accepted bitcoin as a form of payment since 2014, bitcoin remains volatile; it has had three declines (of at least 29 percent) in a very short period of time over the last few months of 2017. As a result, there is a real risk of merchants refusing to accept the virtual currency.
  • Regulations. The regulation of bitcoin can be a double-edged sword. In many ways, the regulatory environment for bitcoin has been very positive. On the other hand, it can also keep bitcoin out of lucrative markets.
  • Cyberattack. The potential for cyberattack is a critical risk for bitcoin – and all cryptocurrencies. Consider the crippling cyberattack that hit Mt. Gox. At the time, Mt. Gox was handling around 70 percent of bitcoin’s trading volume. In its bankruptcy filing, Mt. Gox cited the theft of 850,000 bitcoin (worth $6.8 billion today). In the two years that followed, bitcoin lost more than 80 percent of its value.

Despite these warnings and the present outlook on bitcoin, many still feel that it has a promising future and will experience the success of 2017 again. Some analysts have shared that they believe the price could go 10 times higher over the coming year.

This categorization of “high-risk” and threat of cyberattack are just a few of the reasons why it is difficult for bitcoin merchants to secure the services they need. If your business needs capital to grow, consider a cash advance from an alternative provider. Working with a high-risk specialist will not only help you secure the funds you need, but other merchant services like secure payment processing and chargeback protection.

Business Funding expert, Michael Hollis, is proud to help the backbone of our country, small business owners. His passions include writing/producing music, and travel. First American Merchant is America’s cash advance company, serving both traditional and high-risk Businesses.