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Morgan Stanley Says Crypto is an Asset Class
Traders Magazine Online News, November 8, 2018
At least one research team at a bulge bracket firm says crypto is an asset class.
And it is for the buy-side.
As first reported by Coindesk, a new report from Morgan Stanley noted that Institutional investors are increasingly getting involved in bitcoin and other cryptocurrencies. At the same time, retail investor interest in the volatile and growing space isn’t growing.
In an update to "Bitcoin Decrypted: A Brief Teach-In and Implications," the global banking giant's research division delved into the last six months of bitcoin and highlighted certain trends it noticed. The report is dated October 31.
Coindesk noted the report emphasized its writers' view of the market's "rapidly morphing thesis," which began by defining bitcoin as "digital cash" and noting that investors had full confidence in it, to a solution for issues in the financial system, to a new payment system to ultimately a new institutional investment class.
Morgan Stanley continued by saying various issues and discoveries around the bitcoin ecosystem have caused its thesis to evolve, including the permanent ledger recording all transactions, a number of hacks, hard forks, new technologies which are cheaper than bitcoin, market volatility and other concerns, the report explains.
As such, the market's current thesis appears to be that bitcoin is a "new institutional investment class," and has been for almost a year, the authors wrote. The amount of crypto assets under management has been increasing since January 2016, with $7.11 billion currently being stored by hedge funds, venture capital firms and private equity firms.
Coindesk added that the report did cite three issues clients had with investing in the cryptocurrency space: regulatory uncertainty, a lack of regulated custodian solutions and a current lack of large financial institutions in the space.
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One those issues might be a moot point now. New York regulators just approved Coinbase to offer custody services for crypto assets. The move is designed to provide a safe and secure home for the nascent asset class as well as address a major concern for potential investors – who holds the asset during trading and settlement.
The new custodial entity, dubbed Coinbase Custody Trust Company LLC, was announced in an official announcement on Oct 23.
The New York State Department of Financial Services (DFS) has authorized Coinbase CTC to provide a limited range of custody services for virtual currencies, including Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Ethereum Classic (ETC), Ripple (XRP) and Litecoin (LTC).
Also, the lack of major institutions involved in crypto trading might also be changing. Recently, Traders Magazine reported things might have just taken a huge turn as Fidelity Investments announced it was entering the space. The global asset manager, with over $7.2 trillion of assets under management and currently serves more than 13,000 institutions announced its building out a whole new crypto service targeting the buy-side.
"Our goal is to make digitally native assets, such as bitcoin, more accessible to investors," Fidelity Investments Chairman and CEO Abigail Johnson said in a press release. "We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use."
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