Morgan Stanley will become the first major investment bank in the United States to have a Bitcoin investment portfolio for its wealth management clients. The investment bank manages more than $4 billion in client assets.
The bank will launch three funds that will allow the purchase of the cryptocurrency. Two of the funds are from Galaxy Digital, a crypto traiding firm founded by Mike Novogratz. The third fund offered by Morgan Stanley is a joint effort between asset manager FS Investments and bitcoin company NYDIG.
The Galaxy Bitcoin Fund LP and the FS and NSYDIG fund require a minimum investment amount of $25,000. The third fund, the Galaxy Institutional Bitcoin Fund, requires a minimum initial investment of $5 million.
At the moment only Morgan Stanley’s largest capital clients, with at least $2 million in assets at the bank, will be able to access the Bitcoin portfolios they offer, as they are designed for people with “aggressive risk tolerance.”
For investment firms Morgan Stanley requires them to have a minimum of $5 million in assets at the bank in order to access the Bitcoin portfolios, the bank also requires their accounts to be at least six months old from the time of creation.
Morgan Stanley will limit its Bitcoin investment to 2.5% of its capital. Goldman Sachs, JPMorgan Chase, and Bank Of America do not yet offer portfolios or financial advisories for cryptocurrency purchases.
Why Morgan Stanley decided to dabble in Bitcoin?
With the inclusion of Bitcoin to Morgan Stanley’s investment portfolios, the cryptocurrency gains considerable momentum in the market. Although more and more institutional investors see cryptocurrencies as a new investment possibility, many firms in the financial sector still view this type of asset with skepticism.
Recently a Bank of America report called Bitcoin a “dirty, slow, volatile and impractical” asset. In its report, it questioned the validity of the cryptocurrency as an investment asset due to its high volatility and dismissed its arguments in favor, since the main reason for its purchase “is not diversification, stable returns or protection from inflation, but merely its appreciation. A factor that depends on demand for Bitcoin outstripping supply.”
Despite the negative arguments against Bitcoin, Morgan Stanley investors seem to be more encouraged with the cryptocurrency, because although it is a volatile asset, its volatility has decreased over time and its increased adoption by people has made it go from variations of 400% to 60% in 2020.
While cryptocurrency remains a volatile asset, for Morgan Stanley “Bitcoin’s risk-adjusted returns are now in the same range as the overall U.S. equity market.” Morgan Stanley also optimistically sees how the increased adoption of cryptocurrencies among young people will decrease the volatility of these assets in the future.
Unlike Bank of America, Morgan Stanley sees bitcoin as a refuge from inflation, or rather “the growing distrust of fiat currencies, thanks to massive central bank money printing.” According to the investment fund, thousands of people fear more inflation ahead.
For Morgan Stanley investors, even if Bitcoin does not show the 2020 increases again or its value falls this year, “It cannot be dismissed as an irrational mania”, as cryptocurrencies “are still young”, although they promise a “speed, transparency and low fees that traditional payment methods cannot match.” Cryptocurrencies are here to stay.