Morgan Stanley Says Bitcoin is “New Institutional Investment Class”

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Morgan Stanley, the sixth-largest bank in the US, released a research paper on the 10th anniversary of the Bitcoin whitepaper in which it states that Bitcoin and other cryptocurrencies should be considered a “new institutional investment class”. The news was perfectly timed to coincide with the anniversary and shows how far the space has come during that time.
The paper states that cryptocurrency has gone through several changes in the last decade, from “digital cash” in 2009 to a “gold alternative” in 2017. So, it should now be considered a new investment class, sending ripples of excitement through the cryptocurrency community.

A Different Outlook

Morgan Stanley haven’t been as opposed to Bitcoin as other banks, despite the concept being labeled as “surreal” in 2014 by CEO James Gorman, who later admitted that he didn’t understand it. Gorman must have spent some time educating himself, as Morgan Stanley hosted a Bitcoin event in New York not long after, since when they have been far less vocal about their opinion on cryptocurrencies. In 2017, before the epic bull run that saw Bitcoin hit $20,000, Gorman did however say that he realized Bitcoin was “more than just a fad”, and this report illustrates the level of seriousness they continue to afford Bitcoin and cryptocurrencies.

Why the Herd Isn’t Coming… Yet

The report itself assesses the cryptocurrency and blockchain landscape as a whole and throws up some interesting points, particularly in regard to institutional investment. While it does acknowledge that institutional involvement in cryptocurrency has grown hugely in the past two years, there are still three key reasons most are holding back:

  • Underdeveloped regulation so asset managers don’t want to take on the reputational risk
  • Lack of a custodian solution to hold the cryptocurrency and private keys
  • Lack or large financial institutions and asset managers currently invested

As has been widely reported over recent months, regulations are being worked on in many jurisdictions and enterprise-level custodial solutions are on the way from the likes of Coinbase and the Winklevoss twins. With the latter recently securing insurance for their Gemini exchange. If the first two hurdles can be comprehensively overcome then the third should be a formality, which would make Morgan Stanley’s next report very interesting reading.