If the recent cryptocurrency market report from the U.S. investment bank Morgan Stanley is anything to go by, the market will remain volatile forever. While the report underscored key trade dynamics of the crypto market over the years, the conclusion was debatable. A sneak peek shows that there were obvious market trends in the report. These trends were basically the bull run of late 2017 and downtrend of 2018; not forgetting that the report also laid emphasis on some moves that went unnoticed over the years.
Going down Memory Lane
To make sense of it all, it is critical we go down memory lane to recap the global economic meltdown of 2008, which led to the creation of Bitcoin (BTC). When Satoshi Nakamoto, an unknown group or person pioneered Bitcoin, the world praised the digital asset as an alternative to fiat currency. However, it became a store of value, thus only remotely playing the role of money.
While crypto evangelists praise Bitcoin as the alternative currency, Morgan Stanley seems to have a different opinion. Basically, the investment bank does not believe in Bitcoin as a store of value. Instead, Morgan Stanley sees Bitcoin as an institutional asset class for trading. The financial institution firmly holds that Bitcoin volatility, which has limited its mass adoption, is a feature instead of a challenge to overcome. Interesting!
Understanding Morgan Stanley’s Viewpoint
Is Morgan Stanley right about Bitcoin? Well, when you consider the fact that crypto evangelists are relying on institutional investors to save Bitcoin from a gloomy doom, then Morgan Stanley makes a lot of sense. Institutional investors are interested in the quick profits they make from a market.
Come to think of it, volatility is an essential phenomenon for making fast bucks from arbitrage. No doubt, institutional markets need volatility. However, Satoshi was clearly anti-establishment. Though, institutional investors are establishments personified. Institutional investors would not mind cashing in on the volatility of Bitcoin in the quest to “save it.”
Is Morgan Stanley Ultimately Right?
Not entirely. While institutional investors could potentially play a vital role in the cryptocurrency market, they are not the entire market. Indeed, the good thing about an open market is that everyone can try their hands at it. Yes, the market is much greater than the institutional investors’ pool. Moreover, recent media reports show that cryptocurrency market players are increasingly creating products that will attract institutional investors to the market.
Launching into the cryptocurrency space, Morgan Stanley has three major initiatives. First of all, it plans to create an institutional trade desk to handle NDF products, OTC markets, and futures, targeting Tier 1 institutions in the market. Alternatively, they can focus on futures trading.
The bank has been having in-house meetings to figure out whether they can use Intercontinental (ICE)’s Bakkt Exchange for futures trading or not.
Finally, the trading division of the bank is weighing the option of whether they should back Bitcoin NDF as an Ethereum product or not. A competitor, Goldman Sachs, has also shown interest in the third option.
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