Morgan Stanley, one of the largest banks in the world, has published a note recognizing Bitcoin as an asset class in which it is possible invest. The Wall Street investment bank believes cryptocurrency is reaching the right threshold to play an important role in a diversified investment portfolio.
Invest, but with caution
In a note released Wednesday, the bank's wealth management unit, which has $ 4 trillion under management, noted that any investment in Bitcoin is speculative. However, if investors educate themselves about the risks involved and proceed with caution, Bitcoin could offer them great diversification benefits.
The bank recognized the recent entry into cryptocurrencies by institutional investors as a key factor behind their confidence in Bitcoin.
Additionally, regulators are stepping up their work with cryptocurrencies. This, coupled with increased liquidity and a growing number of crypto products, makes the area worthy of attention for investors.
The bank recommends that investors study cryptocurrencies before diving into the industry. Bitcoin is still in its speculative phase and as such faces various risks, "some identified and others yet to be discovered".
"Our initial modeling suggests that diversification benefits from the cryptocurrency's low correlation with other assets and that Sharpe index improvements can be achieved with positions of no more than 2,5%."
Morgan Stanley launches three Bitcoin funds
In a separate CNBC report, the outlet revealed that Morgan Stanley is set to become the first major bank in the United States to offer its wealth management clients access to Bitcoin. The bank is poised to launch three funds to give its customers access to cryptography.
The move comes after many of the bank's customers have asked for access to the booming cryptocurrency industry, sources told the outlet.
Initially, the product will only be available to customers with at least $ 2 million held by the bank. In fact, such clients are believed to have "an aggressive risk appetite," the report notes.
For investment firms, at least $ 5 million is needed in the bank. In addition, their account must have been active for at least six months. Just as recommended in its investor note, it will limit exposure to BTC to just 2,5% of their portfolio.
Morgan Stanley is partnering with Galaxy Digital for two of the funds. The third will be a joint venture between FS Investments, an asset manager, and NYDIG, a Bitcoin company.
The announcement comes just days after the bank said it participated in a $ 200 million funding round for NYDIG. At the time, NYDIG CEO Robert Gutmann said the companies that participated in the round were partners, not just investors.
“NYDIG will work with these companies on strategic bitcoin-related initiatives ranging from investment management, insurance, banking, clean energy and philanthropy,” he noted.