Is Bitcoin a new institutional investment class? Morgan Stanley is the latest financial institution to chase after Bitcoin and cryptocurrencies! Morgan Stanley considers Bitcoin and other cryptocurrencies as a new institutional investment class. This news follows the fears of the Dow Jones and the observation that Crypto is walking its own path.
In its report titled “Bitcoin Decrypted: A Brief Teach-in and Implications”, dated Oct. 31st, the multinational investment bank’s research department went over the last 6 months of Bitcoin and its observable trends. This was the update to last year’s paper of the same name.
The research team’s findings emphasized what the researcher’s observed: cryptocurrency and Bitcoin is rapidly changing, and has evolved from its birth 10 years ago. Bitcoin’s reputation as “electronic cash” is no longer what it is considered today – that is something that the team had observed.
In 2009, Bitcoin was birthed and offered as an alternative option to big banks and the secret actions taken by them that crippled the world economy in 2008. Bitcoin was open-source, decentralized, and catered to those looking to free themselves from what they perceived to be a necessary evil. Bitcoin attained a cult-like following, and by 2012, it was in the spotlight for its use as a means of transaction on the online black market: Silk Road marketplace. Bitcoin attracted the attention of entrepreneurs, tech-orientated individuals, activists, journalists, and efforts to increase the realm of cryptocurrency followed in droves.
Bitcoin has been able to provide a decentralized payment mechanism while employing a distributed ledger. As a digital currency, its distributed ledger makes it easier to process retail payment transactions, particularly cross-border transactions, with less cost and logistics.
While cryptocurrency and Bitcoin are still widely considered speculative investments, it’s already being used as a store of value. Already in some countries such as Venezuela, cryptocurrency (Dash) has already replaced the native currency. Dr. Zeynep Gurguc from imperial College London has said that the criteria that needs to be fulfilled for cryptocurrency to be fully incorporated into widely adopted payment systems include: scalability, usability, regulation, volatility, incentives, and privacy.
The report also highlighted the emergence of cheaper technologies than Bitcoin, volatility in the market, the number of hacks, and hard forks as concerns that will affect the Bitcoin ecosystem.
The report, however, noted that despite the above and the prevailing bear market of 2018, still considers Bitcoin and Altcoins as a “new institutional investment class”. They foresee this going into the future, and we think this is quite bullish!
The research team also noted other investment firms like Fidelity entering the market, investments in crypto firms such as Binance and Bakkt, and regulatory approvals as evidence of the increased participation of financial institutions lending credence to the market.
According to the Morgan Stanley Research team, bottlenecks do exist in this market, however. They include regulatory disparities, absence of regulated custodial solutions, and the lack of formidable financial institutions operating in the industry.
The report also mentioned Stablecoins, and how 2018 was the year of rapid adoption of stablecoins to protect investments in times of extreme volatility. However, the report does not see all stablecoins surviving in the long-term. The stablecoins that will survive, it noted, will most likely have relatively lower transaction costs, very high liquidity, and a clear regulatory structure.
What do you think? Are you bullish? Are you bearish? Even during a bear market, while prices are down, major players are slowly coalescing around the investment and the market. Follow the money! Let us know what you’re doing on our Facebook page!
