Bitcoin and Cryptocurrencies a New Institutional Investment Class: Morgan Stanley Report

The global banking giant’s research reveals that the number of institutional investors in the cryptocurrency space is growing.

In another instance of Wall Street warming up to digital currencies, the investment bank Morgan Stanley has released a bullish report on cryptocurrencies, which hails Bitcoin and its peers as a “new institutional investment class”.

In an update to a previous report (“Bitcoin Decrypted: A Brief Teach-In and Implications”) released on October 31, Morgan Stanley’s research division provides an overview of its “rapidly morphing thesis” on Bitcoin and cryptocurrencies, declaring that from 2017 onwards, BTC and other digital currencies had become a new institutional asset class, regardless of the current bear market.

The report states that the cryptocurrency market is seeing an influx of institutional investors, while the number of retail investors remains stagnant. There is also a marked surge in the number of new crypto-tied futures and a rapid increase in the formulation of cryptocurrency funds (the report puts the amount currently being stored by venture capital firms, hedge funds, and private equity firms at $7.11 billion).

Morgan Stanley also cites promising developments involving big names, such as Coinbase’s recent fundraising round, investments in BitGo and Binance, and Fidelity’s Digital Asset Services. However, the report notes that the three main barriers preventing more institutional involvement are: underdeveloped regulation, lack of a reputable and reliable custody service, and lack of large financial institutions and asset managers in the crypto space.

Touching on other rising trends, the report noted that there was a steady uptick in the popularity of stable coins (digital coins that are pegged to fiat currencies, commodities, and crypto assets, in order to keep their value stable). It also observed that most initial coin offerings (ICOs) were failing, with their funding being liquidated, and that the market was displaying a significant move towards security token offerings (STOs) or regulated ICOs, following the regulatory crackdown on ICOs and the crypto market in general.

The report also touched favorably upon blockchain technology as a whole, with applications and uses such as cross-border transfers, shipping and trade finance, and reinsurance.

The overall positive tone of the report suggests that Morgan Stanley may be considering a foray into the world of cryptocurrencies in the near future. Last month, anonymous sources told media outlets that the banking giant was considering offering clients Bitcoin swap trading.