Morgan Stanley announced that its European fund has set aside cash to invest in the bitcoin market. According to its annual report to shareholders filed with the SEC on Jan. 5, the company’s European Opportunity Fund deliberately attempted to invest in the volatile crypto-currency market through cash-settled futures contracts or indirectly through Grayscale Bitcoin Trust (GBTC).
Following the announcement, MS shares have gained about 2.24 percent over the past five days to trade at about $87.77 during opening hours Monday. The global investment bank, which manages more than $6.5 trillion in assets, reportedly bought $3.6 million worth of GBTC on behalf of its clients.
“The Fund may, in accordance with its principal investment strategies, invest up to 25% of its total assets in a wholly-owned subsidiary of the Fund organized as a Cayman Islands corporation, Europe Opportunity Cayman Portfolio, Ltd. (the “Subsidiary”). The Subsidiary may invest in bitcoin indirectly through cash-settled futures contracts or indirectly through investments in Grayscale Bitcoin Trust (BTC) (“GBTC”), a private investment vehicle that invests in bitcoin“, according to SEC filings.
Nevertheless, the company warned that the value of GBTC could drop “precipitously” to zero due to regulatory changes, a crisis of confidence, a breach or operational problem in the bitcoin network, or a shift in user preference to competing crypto-currencies.
In addition, Grayscale’s parent company, Digital Currency Group, is in trouble following significant exposure to the FTX and Alameda implosion. Notably, Grayscale holds about 653,633 bitcoins for private investors, making it a major crypto whale.
Morgan Stanley joins institutional investors with interest in bitcoin and crypto-currency market
Morgan Stanley has entered the crypto-currency market to diversify its portfolio against the poor performance of the stock market around the world. However, the risks associated with the crypto-currency market have increased exponentially in recent months. In addition, Grayscale’s parent company, DCG, is facing bankruptcy, which could cause the crypto-currency market to fall even further in the coming months.
Arcane Research stated:
“In short, if DCG goes bankrupt, the company could be forced to liquidate its assets. This could force DCG to sell its considerable positions in GBTC and its unknown positions in ETHE and other Grayscale trusts.”
Recall that Gemini accused DCG’s Genesis Trading of failing to pay $900 million to its Earn customers.
Investors should pay attention to the ongoing financial distress related to Digital Currency Group (DCG) as the outcome could severely impact crypto markets.
Arcane Research (@ArcaneResearch) January 4, 2023
Nevertheless, Morgan Stanley and other major banks around the world have shown long-term interest in the bitcoin and blockchain market. In addition, regulators around the world are developing policies to adopt bitcoin as an asset class.