Bank of America has launched digital assets coverage nearly three months after forming a crypto team. The highlighted companies include a wide range of industries from payment providers and banks to utilities to media giants.
The $2 trillion market value of all cryptocurrencies made the sector “too large to ignore,” said a group of analysts led by Alkesh Shah in a new research note. The note said 200 million users make up the digital asset universe.
“We believe crypto-based digital assets could form an entirely new asset class,” said the analysts, 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 notes 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 lists the buy and neutral-rated names in its existing global coverage universe that have exposure to the digital asset theme. Payment providers PayPal (Nasdaq: PYPL) and Coinbase (Nasdaq: COIN) top the list, followed by Signature Bank, JPMorgan, Morgan Stanely and SVB Financial.
Utilities Black Hills (Nasdaq: BKH), Exelon, NRG, Public Services Enterprise Group and Vistra make the list for crypto mining exposure. 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 highlights Fox (Nasdaq: FOX) as the first major media company to enter the NFT space 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 & Bunge (NYSE: ADM) made the list for leveraging blockchain technology to process transactions in global agricultural trade.
DraftKings (Nasdaq: DKNG) was the only gaming name, given its NFT marketplace in partnership with Tom Brady’s Autograph.
Digital Realty Trust (NYSE: DLR) and Equinix (Nasdaq: EQIX) represent data centers with Bank of America calling the companies well-positioned to “capitalize from the digital asset mining migration from China to North America.”