The research arm of banking giant Morgan Stanley recently released a report showing the increase in institutional participation in the cryptocurrency market. On Wednesday, October 31st, Morgan Stanley released an update to its report – “Bitcoin Decrypted: A Brief Teach-In and Implications”.
In the report, Morgan Stanley highlights the trends over the past six months of Bitcoin and the overall crypto market. However, Morgan Stanley says that even though the institutional investment is on a rise, the retail participation is stagnant.
Observations Made Through the Rapid Morphing Thesis
Morgan Stanley report started by specifically emphasizing on the “rapidly morphing thesis”. The thesis noted Bitcoin as “digital cash” and said that investors had full confidence in the cryptocurrency. Furthermore, the thesis noted how Bitcoin has emerged as an answer to the issues within the traditional financial system.
Moreover, the thesis also mentions several issues discoveries which have helped the Bitcoin ecosystem to evolve as a whole. It takes a tour through all things like a number of hacks, hard forks, price volatility, and others. Moreover, it also lauds the most important aspect i.e. the permanent blockchain ledger which records all transactions.
The most important thing which the thesis mentions is that for almost a year now, Bitcoin has emerged as the “rapidly morphing thesis”. It also says that since January 2016, there is a gradual increase, in the crypto investments, made in institutional crypto products. Venture capital firms, hedge funds, and private equity firms have stored a total of $7.11 billion so far.
This figure is certainly expected to shoot up as big players like the Intercontinental Exchange (ICE) and Fidelity Investments get their platforms released. ICE is currently preparing itself for the launch of its Bakkt platform expected by the end of 2018. Furthermore, ICE announced that the Bakkt platform will offer physically-settled Bitcoin Futures contracts. As a result, it is likely to usher more liquidity in the crypto market.
On the other hand, financial services giant Fidelity Investment announced its crypto-centric platform Fidelity Digital Assets. The platform will offer crypto storage and trading solutions specifically targetted towards institutional players.
The Growing Importance of Stablecoins
The report touches down on one of the most popular topics currently i.e. stablecoins. Stablecoins are basically fiat-pegged digital currencies used for quick execution of crypto trades. However, the report goes the cite the use of controversial stablecoin Tether (USDT). The report notes that Bitcoin is “moving increasingly towards trading vs the stable coin USD-Tether (USDT) [sic]”.
It further notes: “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.”
Off lately, there is a growing number of stablecoins introduced within the crypto market. Or we can say that the market is preparing for institutional trading making the trading process simple.