Morgan Stanley: Bitcoin is a New Institutional Investment Class

There is a rapidly growing interest in bitcoin and other cryptocurrencies among institutional investors while there seems to be lethargy in the number of retail buyers operating within the space. As such, bitcoin and altcoins now constitute a new institutional investment class since 2017, according to new research from major US bank Morgan Stanley.

In the report titled “Bitcoin Decrypted: A Brief Teach-in and Implications” and dated Oct. 31, the multinational investment bank’s research department gave an overview of the last six months of bitcoin and brought up insights about observable trends. This new report serves as an update to an earlier report published in December titled “Bitcoin Decrypted: A Brief Teach-in and Implications.”

In view of this, the prevailing bear market coupled with the decline in price predisposes bitcoin and altcoins as a “new institutional investment class,” and this has been the trend in the last year. The study cited the new crypto services division of Fidelity, investments in crypto firms such as Binance, and regulatory approvals as evidence of the increased participation of financial institutions lending credence to the market thesis.

According to the Morgan Stanley Research, some of the bottlenecks faced by clients who were interested in investing in the cryptocurrency industry include regulatory disparities, the absence of regulated custodial solutions, and the lack of formidable financial institutions operating in the industry.

The report also recorded the gradual rise of fiat-pegged crypto stablecoins, which more or less began in 2017 but has quickened this year. The decline in cryptocurrency prices elicited an increase in the share of BTC trade volumes taken by USDT. Exchanges were used to trading crypto for crypto with relatively few involved in the trade of crypto for fiat. The research, however, does not see all stablecoins surviving on the long-term. Those who would survive will most likely have relatively lower transaction costs, very high liquidity, and a clear regulatory structure.