morgan stanley

Morgan Stanley & Crypto: We told you so

We hate saying I told you so, but…

  • Morgan Stanley, one of the world’s largest investment banks, has just poached Credit Suisse’s resident “bitcoin expert” to head the former’s digital assets unit.

  • Morgan Stanley is reportedly preparing to offer bitcoin swap trading for clients, joining other top banks in a sector-wide effort to explore digital currencies.

  • Goldman Sachs clarified last week that the bank is working on a type of derivative for bitcoin called non-deliverable forwards due to client demand.

We published an article on July 27, 2017, covering our recent interactions with Morgan Stanley contacts. We presented a bullish case after our discussions with Morgan Stanley. Most of those cases have turned out to be true (bar the ETF comment: it doesn’t look like an ETF for Bitcoin will come from Morgan Stanley in 2018).

Now, Morgan Stanley have consistently made more and more comment on Bitcoin, Blockchain and Crypto (especially from Q3 2018).

The purpose of sharing this post this morning is two fold. One: we want to remind everyone that bullish news presented at an early time (i.e. as per our original post in July 2017) should never be forgotten. Always keep your finger on fundamentals, as fundamentals are what will drive this market long term. Two: Sometimes things play out as expected (i.e. the majority of our calls back in July 2017) and sometimes they don't. Just because we post something, or anyone else posts something, always have a plan B in case some or all doesn't eventuate as expected. We are all human and the Crypto market is INEFFICIENT (An inefficient market, according to efficient market theory, is one in which an asset's market prices do not always accurately reflect its true value).

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Interesting side-note: Morgan Stanley veterans aren’t immune to the lure of Crypto. Zoe Cruz, a former executive, is on the board of Ripple. The bank’s former CEO, John Mack, took an interest in Omega One. Morgan Stanley are just one fine example of established corporations who are going full-speed into Cryptocurrency and Blockchain.

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Strong Institutional Investment for Bitcoin

In 2017, financial services company, Morgan Stanley, had a bearish outlook on Cryptocurrency and Bitcoin as a whole. However, for their 2018 market analysis, they are bullish for the 2018 year, going into 2019, and beyond.

Why the complete change of pace? It could be that Morgan Stanley have privately invested over $400million into Bitcoin and wider Alt-Coin projects, or the fact that they are planning on releasing a derivatives project directly to their Client base. Or both.

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It’s important to note that the bank is not actually planning to trade Bitcoin or cryptocurrencies directly but rather to offer Bitcoin swap trading tied to futures contracts. Earlier this year, CEO James Gorman said that a trading desk specializing in derivatives tied to digital assets could be a potential service offered to clients.

Futures are contracts in which the buyer has agreed to purchase an asset at an agreed time and price in the future. The same arrangement stands for the party selling the asset as well. These contracts note both the quality and quantity of the assets that are being traded, standardized, and either require physical delivery of the asset being traded or are settled in cash.

According to Bloomberg, the bank already has the measures in place to offer Bitcoin swap trading, however, it will not officially launch any initiative without first ascertaining the level of institutional client demand and completing a thorough internal approval process.

The takeaway here is that there is very strong Institutional interest in the Crypto space and that is growing at rapid rates, daily. A bullish return is on the horizon.