On October 31, multinational investment bank and financial services company, Morgan Stanley, released their latest report on Bitcoin. The report, entitled “Update: Bitcoin, Cryptocurrencies and Blockchain,” stated that Bitcoins and altcoins have constituted a “new institutional investment class” since 2017.
In comparison to Morgan Stanley’s 2017 report on Bitcoin, their 2018 outlook is bullish. The report contains an overview of both how Bitcoin has evolved, and how its investment purpose has changed throughout its existence. Morgan Stanley analysts also touched upon the recent stablecoin trend and both central bank and regulator reactions to Bitcoin for the last six months. The report listed several shortcomings that persist for Bitcoin, such as energy consumption and a lack of a robust regulatory framework. Analysts have revealed about the “surprising” change in funding flowing into the sector, along with an increasing trend for crypto-tied futures.
All eyes on futures
This latest development, described by the bank as “surprising,” comes against the backdrop of Morgan Stanley offering trading in derivatives tied to the largest cryptocurrency. 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.
As previously reported by Cointelegraph, Morgan Stanley told clients that Bitcoin was similar to the Nasdaq, albeit moving “15x” faster. The bank also predicted that financial markets would increasingly lean towards the use of crypto in the future:
“Over the coming years, we think that the market focus could turn increasingly toward cross trades between cryptocurrencies/tokens, which would transact via distributed ledgers only and not via the banking system.”