The US banking giant, Morgan Stanley, has released an update to its “Bitcoin Decrypted: A Brief Teach-In and Implications.” This time around, experts at Morgan Stanley claim that Bitcoin is a “new institutional investment class.”
1 November 2018 – According to a new report published by Morgan Stanley, institutional investors are increasingly getting engaged with Bitcoin and other altcoins. The bank also noted that the number of retail investors in the cryptocurrency market remains stable.
Morgan Stanley: Bitcoin is a Digital Cash
Morgan Stanley has released an update to its previous report, dubbed “Bitcoin Decrypted: A Brief Teach-In and Implications.” In the fresh report, the global banking institution discussed the last six months of Bitcoin’s performance and singled out some factors that were influencing this cryptocurrency.
One of the most notable things in the report is the “rapidly morphing thesis.” Morgan Stanley defined Bitcoin as “digital cash” and highlighted that investors had full confidence in it. The banking went then went on to discuss how Bitcoin could solve issues in the financial system and its ability to become a new payment system.
The report states that a number of issues and discoveries surrounding the Bitcoin ecosystem caused Morgan Stanley’s thesis to develop. These include the permanent ledger recording all transactions, Bitcoin’s hard forks and a number of hack attacks. Some technologies that are cheaper than Bitcoin and Bitcoin’s market volatility also led to the thesis formation.
To be more specific, Morgan Stanley’s current thesis is that Bitcoin is a “new institutional investment class,” and has been for almost a year. The amount of cryptocurrency assets under management has been rising since January 2016. In fact, $7.11 billion of crypto assets are currently being stored by hedge funds, private equity firms and venture capital firms.
Three Problems with Crypto Investment
Morgan Stanley notes that the fact that major financial institutions are getting involved in this market supports its thesis. The report referred to Fidelity’s new cryptocurrency services division. BitGo and Binance, investments in Seed CX, Coinbase’s recent fundraising event and regulatory approvals.
The report also singled out three issues that clients had with investing in the crypto space. These comprised regulatory uncertainty, a lack of regulated custodian solutions and a current lack of large financial institutions in the space.
Morgan Stanley’s report also dug into a popular topic in the crypto space, stablecoins. The bank wrote that Bitcoin is “moving increasingly towards trading vs the stable coin USD-Tether (USDT) [sic].” Here, Morgan Stanley referred to the dollar-linked token managed by Tether.
The report further notes:
“USDT took an increasing share of BTC trading volumes as cryptocurrency prices started falling. This occurred because many exchanges only trade crypto->crypto and not crypto->fiat. Trading crypto->fiat requires going through the banking sector which charges a higher fee. Also, as bitcoin prices fell, so did most all other coins so if owners wanted to come out of bitcoin holdings, they needed to go to another asset which was closer to the valuation of the U.S. dollar.”
Cryptocurrency firms are now following the trend, and exchanges and other companies are also developing their own stablecoins as “part of the next wave of development.”
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