Morgan Stanley becomes the first big US bank to offer its wealth management clients access to bitcoin funds
Well, if you keep yourself familiar with the current news, I am sure you are tired of hearing the word bitcoin very now and then, especially when there’s so much noise about it and such little action. Well, let’s just say we are about to witness some action because here’s some news that may set the path for bitcoin’s future. However, before we move ahead with the new beginning for bitcoin, let’s just do a little flashback of how and when bitcoin became such a household name. So, the reason bitcoin gained so much popularity in the past few years, apart from the fact that the now known as Technoking of Tesla- Elon Musk tweeted about it, is because, like any other cryptocurrency, bitcoin has some special features that may prove to be the new change we need in the world of finance. What is so special about bitcoin is the fact that Bitcoin offers an efficient means of transferring money over the internet and is controlled by a decentralized network with a transparent set of rules, thus presenting an alternative to central bank-controlled fiat money. However, despite many conversations, bitcoin hasn’t explicitly made its move towards acceptance in the asset class, until now. Yes, until now.
The USD 4 trillion client asset holder, Morgan Stanley has recently announced the move to offer its wealth management clients access to bitcoin funds, as the first big United States bank to undertake the move. The investment bank that apparently made headlines with the news informed its financial advisors via an internal memo earlier this week about their intent to launch access to three funds that enable ownership of the very famous cryptocurrency- bitcoin, as revealed to sources by people with direct knowledge of the matter. The move came especially after the demand clients made towards the exposure of the cryptocurrency, as we would have figured, keeping in view the momentum that the cryptocurrency had gained. This move is being seen as a significant step in the acceptance of bitcoin as an asset class, which however had been missing so far. It is no secret that the bitcoin’s rally that took place in the pandemic year left under pressure a large number of Wall Street firms in an attempt to consider getting involved in the nascent asset class. Again, the asset is highly volatile and cannot be made entirely available to the people without having full in hand knowledge of what the future holds for the currency, but this move may lighten some fog from the path towards bitcoin.
It is to be noted, however, that the bank is allowing only its wealthier clients access to the asset, at least for now, with further developments to be witnessed in the matter. It comes from the fact that the huge investment bank sees the asset fit only for those with an aggressive risk appetite, or in other words the excessively wealthy. Those being considered would be classified into the category after ensuring holdings of at least USD 2 million in assets with the investment bank. In case you’re wondering the reason for such volatility in the price of bitcoin, you can credit it to speculation. While it’s possible to buy physical goods with Bitcoin in some places, the large majority of Bitcoin transactions are still investment-based. As such, people buy and sell Bitcoin like they would any other investment. This buy-sell cycle is what makes Bitcoin’s price so volatile. Not only that, but Bitcoin volatility is also driven in large part by varying perceptions of the intrinsic value of the cryptocurrency as a store of value and method of value transfer.
While we are looking at this move as a step towards the acceptance of bitcoin in the asset class, it is imperative to note that it, at best, comes with restrictions. These restrictions basically can be seen as an attempt to classify those ready for the volatility from those that still need to play it safe. Therefore, Morgan Stanley’s move to offer its wealth management clients access to bitcoin funds includes the parameter that only those investment firms that have at least USD 5 million at the investment bank can qualify for the new stakes, with the accounts being at least 6 months old in either case. And even for those accredited U.S. investors with brokerage accounts and enough assets to qualify, Morgan Stanley is limiting bitcoin investments to as much as 2.5% of their total net worth, as informed by the sources that confirmed the news.
As for some detail inside the announcement, there has been an introduction of the three funds that enable ownership of the very famous cryptocurrency- bitcoin, two of whom are from Galaxy Digital. Galaxy Digital is a crypto firm founded by Mike Novogratz, which claims itself as a diversified financial services and investment management innovator in the digital asset, cryptocurrency, and blockchain technology sector. The third fund of the three funds being mentioned is a joint effort from asset manager FS Investments and bitcoin company NYDIG. The Galaxy Bitcoin Fund LP and FS NYDIG Select Fund have minimum investments of $25,000, while the Galaxy Institutional Bitcoin Fund LP has a $5 million minimum. These said investments can begin to be made in the coming month after the Bank’s financial advisors train themselves in the new offerings. Even though many of the other leading banks like Goldman Sachs, JP Morgan or Bank of America hasn’t currently allowed their advisors to offer direct bitcoin investments, the news of Morgan Stanley may bring about some change in the perception. Earlier this month, JPMorgan filed documents related to a new debt investment tied to a basket of stocks with crypto exposure like MicroStrategy, the software firm that holds bitcoin on its balance sheet, and payments firm Square.