Morgan Stanley Says Crypto Is A New Institutional Asset Class

Institutional investors are increasingly getting involved in bitcoin and other cryptocurrencies - while the number of retail investors in the space is staying stagnant - according to a new report by Morgan Stanley.

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.

Perhaps most notably, the report emphasized its "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.

Various issues and discoveries around the bitcoin ecosystem have caused the 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.

The group's current thesis is that bitcoin is a "New institutional investment class," and has been for almost a year.

The fact that major financial institutions are increasingly getting involved supports this thesis, the report continued, citing Fidelity's new crypto services division, investments in Seed CX, BitGo and Binance, regulatory approvals and Coinbase's recent fundraising round.

Bitcoin is "Moving increasingly towards trading vs the stable coin USD-Tether [sic]," the report states, referring to the controversial, dollar-linked token operated by Tether.

Half of all current bitcoin trading is now against another digital asset, continuing a trend which began last year.

"USDT took an increasing share of BTC trading volumes as cryptocurrency prices started falling. This occurred because many exchanges only trade crypto->crypto and not crypto->fiat. Trading crypto->fiat requires going through the banking sector which charges a higher fee. Also as bitcoin prices fell, so did most all other coins so if owners wanted to come out of bitcoin holdings, they needed to go to another asset which was closer to the valuation of the U.S. dollar."

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies.