• Bitcoin is now becoming a new investment class
• Many investors now have full confidence in the digital asset
• Stablecoins are seeking to create a form of price stability

Institutional investors are increasingly getting involved in bitcoin and other cryptocurrencies – while the number of retail investors in the space is staying stagnant – according to a new report by Morgan Stanley.

The number of institutional investors trooping into cryptoshpere is rising steadily while retail investors are slowing down. Morgan Stanley reports that Bitcoin is now becoming “a new investment class.”

Morgan Stanley Cryptocurrency Report

Full Confidence in Bitcoin

Bitcoin (BTC) Price Today – BTC / USD

Please enter CoinGecko Free Api Key to get this plugin works.

The October 31, 2018 report, dubbed “Bitcoin Decrypted: A Brief Teach-In and Implications,” was compiled and released by the American-based Investment Bank Morgan Stanley and says the bank’s research division observed Bitcoin’s trend for the last six months to come up with the conclusion. The report revealed that over $7.11 billion worth of cryptocurrencies was being managed by hedge funds and private equity companies since January 2106.

The report notably emphasizes that Bitcoin, which it refers to as “digital cash,” is a “rapidly morphing theses” and that investors now have full confidence in the digital asset. The report says further Bitcoin is fast becoming a solution in the financial system and becoming a new payment system and ultimately becoming a new institutional investment class.

The report states further that several issues and discoveries surrounding the Bitcoin ecosystem have caused the thesis to evolve. This includes the permanent ledger that records every transaction, hard forks, several hacks, new technologies that are more affordable, market volatility and other related concerns.

There is evidence that leading financial institutions are now boldly involving themselves in Bitcoin, giving further credibility to the report. For instance, the report cites the latest developments including Fidelity’s new division created to deal with crypto services, the recent fundraising by Coinbase and investments by several multinationals in Binance, BitGo and Seed CX to name a few.

The report also cited the main challenges that clients have had with the cryptoshpere and singled out regulatory uncertainty, lack of regulated custodial services and the absence of large financial institutions in crypto space.

Emergence of Stablecoins

The emerging issue of Stablecoins did not miss out as the report calls them types of cryptocurrencies that are seeking to create a form of price stability. The report notes that Bitcoin was increasingly moving towards trading against the Stablecoin USD-Tether (USDT), because most cryptocurrency exchanges do not accept fiat currencies contributed in this state of affairs. The report’s authors explained:

“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.”

Crypto startups are quickly joining the trend while cryptocurrency exchanges and crypto companies are developing their own Stablecoins so they can become part of the new wave of development.

In an update to “Bitcoin Decrypted: A Brief Teach-In and Implications,” the global banking giant’s research division delved into the last six months of bitcoin and highlighted certain trends it noticed. The report is dated October 31.

Perhaps most notably, the report emphasized its “rapidly morphing thesis,” which began by defining bitcoin as “digital cash” and noting that investors had full confidence in it, to a solution for issues in the financial system, to a new payment system to ultimately a new institutional investment class.

Various issues and discoveries around the bitcoin ecosystem have caused the thesis to evolve, including the permanent ledger recording all transactions, a number of hacks, hard forks, new technologies which are cheaper than bitcoin, market volatility and other concerns, the report explains.

As such, the group’s current thesis is that bitcoin is a “new institutional investment class,” and has been for almost a year. The amount of crypto assets under management has been increasing since January 2016, with $7.11 billion currently being stored by hedge funds, venture capital firms and private equity firms.

The fact that major financial institutions are increasingly getting involved supports this thesis, the report continued, citing Fidelity’s new crypto services division, investments in Seed CX, BitGo and Binance, regulatory approvals and Coinbase’s recent fundraising round.

That being said, the report did cite three issues clients had with investing in the cryptocurrency space: regulatory uncertainty, a lack of regulated custodian solutions and a current lack of large financial institutions in the space.

Stablecoin trading
The report also delved into a popular topic as of late: stablecoins, or types of cryptocurrencies that seek to enable some form of price stability.

Bitcoin is “moving increasingly towards trading vs the stable coin USD-Tether (USDT) [sic],” the report states, referring to the controversial, dollar-linked token operated by Tether. Half of all current bitcoin trading is now against another digital asset, continuing a trend which began last year.

The fact that many crypto exchanges do not accept fiat currencies contributed to this state of affairs, the report’s authors said.

They went on to explain:

“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.”

Crypto startups are now hopping on the trend, with exchanges and other companies developing their own stablecoins as “part of the next wave of development.”

That being said, the researchers do not see all stablecoins surviving: only those “with the lowest transaction costs, highest liquidity and defined regulatory structure” are likely to see increased adoption.