A comprehensive thesis released on October 31st by Morgan Stanley has mapped out the evolution of bitcoin from digital cash to a fully fledged institutional asset class. The report indicates that while the retail investment space might be stagnating, institutional investment has been steadily increasing. The institutional investment was divided into 48% hedge funds, 48% venture capital and 3% private equity.
Morgan Stanley thesis – bitcoin rapidly morphing
The research outlined the stages of bitcoin development and how the asset class is rapidly morphing. While in 2009 it was viewed as merely a digital currency, it has been categorized as an institutional investment class since 2017 and as a store of value since spring 2018 (this is most linked to collapsing economies such as Turkey and Venezuela where people flocked to BTC). The report also referred to bitcoin as a replacement for the existing payment system and as a new capital allocation and fundraising mechanism. The ‘morphing’ of bitcoin is not linear, and it occupies different roles simultaneously, such as an institutional asset class, store of value, digital currency, alternative funding mechanism, payment system replacement, and hedge against market collapse.
The Morgan Stanley report also indicated that although the coin has forked 44 times, unlike a stock split these forks do not seem to have any impact on the price of BTC.
Institutional Investment is already here
The most simple and obvious reason for the steady price of BTC the past couple of months (the most stable in its history) could be increased institutional investment. According to the authors of the report, institutions have been invested in the new asset class for a year already. The report cites a number of important forays into the industry by institutions such as Fidelity, Bain Capital, Genesis Trading, Vertex, Coinbase, Gemini Trust, SETL, and Goldman Sachs. Lack of custody solutions and regulation are what is preventing more institutional investment into the space.
The Morgan Stanley report also lists some investments and blockchain projects being completed by banks including ABN Amro, Allied Irish Bank, BNP Paribas, Credit Suisse, Goldman Sachs, Citi Group, Wells Fargo, Bank of America, J.P. Morgan, and HSBC. Of all these, only ABN Amro has commercially launched a product. Other blockchain initiatives are in various stages, such as proof of concept, testing, pilot, patent filed, or successfully tested. No mention was made of Ripple, which has been expanding internationally and making agreements with large banks. They offer a number of products suited to large settlements and transactions, and Banco Santander has recently integrated their services.
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Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.