Like many late arrivals to cryptocurrency, Morgan Stanley doesn’t quite know what to make of bitcoin. The investment bank understands money, unless that money is peer-to-peer digital cash, in which case it struggles. Its latest report into the cryptocurrency ecosystem reveals its shifting stance on bitcoin.
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Morgan Stanley’s ‘Morphing Thesis’
Is Code for ‘We Were Wrong’
Investment banks, while less risk-averse than their central banking peers, still take a conservative stance on cryptocurrencies. It’s only now, a decade on from Bitcoin’s inception, that they’re starting to give this digital asset class serious attention. In its report on bitcoin, cryptocurrencies and blockchain, dated Oct. 31, Morgan Stanley begins by speaking of a “rapidly morphing thesis” on bitcoin and cryptocurrencies. Given that its previous report arrived earlier this year, during which time bitcoin has scarcely changed, this could be interpreted as an admission of them having gotten things wrong.
“Bitcoin Decrypted: A Brief Teach-In and Implications” lists no less than seven phases of bitcoin, during which time the cryptocurrency was understood by Morgan Stanley to hold different utilities. The first of these, which supposedly runs from 2009-2016, is bitcoin as digital cash, which runs concurrently with bitcoin as an “antidote to incumbent financial system and central bank” and as “replacement for existing payment system.” While bitcoin has many applications, a sizable number of cryptocurrency proponents would dispute the assertion that its use as digital cash effectively ended in 2016.
From ‘No Tangible Intrinsic Value’ to
‘New Institutional Investment Class’
According to its Oct. 31 report, Morgan Stanley’s current interpretation of bitcoin and cryptocurrencies is as a “new institutional investment class,” which it dates from 2017 to the present. Bitcoin’s suitability as an investment vehicle is something that many of its staunchest supporters have known for years, and their conviction in this has earned them thousand-percent returns. Any institutional investors arriving at this decision a year ago, in comparison, would have realized a loss of around 10 percent.
Morgan Stanley’s current understanding of bitcoin as being suitable for institutional investment differs considerably from its report in January of this year. Then, the investment bank referred to bitcoin as a “controversial asset,” and pondered whether it might be “a new currency, a new type of gold, or a speculative fad?” Deploying its own version of the “blockchain not bitcoin” meme, the January report opined that “while the future of bitcoin and other cryptocurrencies remains to be seen, the concept and technology behind them may influence innovation going forward.”
This view contrasts with its latest report, which, on the application of blockchain technology in the financial sector, notes that the benefits are “mainly unclear.” In January, Morgan Stanley wrote that “cryptocurrencies remain an experimental concept that is not regulated or backed by any central bank worldwide and has no tangible intrinsic value.” In just 10 months, its “morphing thesis” of bitcoin has changed considerably. Bitcoin, on the other hand, has not shifted one bit.
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