By
Steve Muchoki
April 17th, 2024
It seems that Morgan Stanley may be working on its crypto initiatives. The financial industry giant is currently watching how the situation with Fidelity unfolds.
Fidelity recently entered the crypto markets and is providing digital assets custodial services to users.
Just for a reminder, Fidelity Digital Assets, a company that offers enterprise-quality custody and trade execution services for cryptocurrencies to institutional investors, has announced that its platform is live. Selected customers have got access to cryptocurrency custody and trade execution operations, while others may have to wait until September.
Sources close to Morgan Stanley suggest that their clients are growing impatient with the seemingly endless wait for a crypto option. They also said that a small percentage of the company’s clients are always inquiring about their foray into digital assets.
Morgan Stanley’s arch rival Goldman Sachs has been more open about its investments in cryptocurrency sector. It has already invested in BitGo and Circle while Stanley hasn’t made any significant moves in the sector yet.
The Retrogressive Market ‘Noise’
The cryptocurrency industry has suffered from various setbacks including the persistent bearish trend that lasted throughout 2018. Also, the recent government shutdown is accused of causing various delays in this new market including the postponement of the Bakkt launch.
Amidst all this undesirable ‘noise,’ it seems like developments in the blockchain and crypto industries have not slowed down so far.
Abacus Journal writes of how Goldman Sachs led investments position the firm to quickly scale up once the regulatory landscape is clear and defined. They say that Morgan Stanley hasn’t made those any ‘in-kind’ investments that match Goldman’s and clients and brokers have been grumbling about it.
But there may be some hopes according to two sources. Morgan Stanley leadership is enamored with the path that Fidelity is taking and believe they can take the same path – and fashion it to be of interest to the firms largest institutional and UHNW clients.
“Are we behind? Yes. That really can’t be disputed at this point.” said the first source near the top of the communications org chart at Morgan Stanley. He added:
“But that won’t be the case once we commit to a particular strategy. We believe we are well positioned when the time is right.”
A second source closer to the broker ranks said:
“The word we hear is that leadership finds the Fidelity model for crypto appealing. And that could be the way it goes down here. Whatever strategy they choose, it needs to come quickly.
We are getting asked about it daily. It does seem like clients that are aware of Bitcoin in particular see it as digital gold. That phrase has popped up often with UHNW clients.”
Two market watchers point to Morgan Stanley as a buying opportunity, saying the stock looks good from a technical and fundamental standpoint.
Strategic Wealth Partners’ Mark Tepper believes the bull market is in its final innings, and Morgan Stanley has diverse revenue streams that will hold up even if the economy slows. He said:
“With Morgan Stanley you know we have a company that has M&A exposure which is good, and because we’re in this slow-growth economy right now where companies are in acquisition mode to fund further growth, M&A is good.”
Like Tepper, Instinet’s Frank Cappelleri says that Morgan Stanley is the most attractive financial stock at current levels, although he, too, is not pounding the table on this trade. He notes that the stock has been firmly in a downtrend over the last year, shedding more than 30 percent since its recent high last March.
“The stock has been through this before. … I point to the 10-year chart. We see from 2009 to 2012 the stock was down 70 percent and then from 2015 to 2016 another 50 percent. Whole time it was able to make higher lows on a long-term basis and those rallies coincided with relative strength versus the XLF,” He explains.