On Wednesday, Morgan Stanley became the first big US bank to offer select clients access to bitcoin funds. People privy to the bank’s internal communication shared the information yesterday. In contrast, Goldman Sachs, JPMorgan Chase, and Bank of America’s wealth management divisions have yet to offer cryptocurrency investments to their clients.
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Morgan Stanley declined to comment. However, its stock closed with a gain of 1.5% during earlier trading. Meanwhile, Bitcoin prices rose 3% to $58,008 on Wednesday.
MS Offers Three Bitcoin Funds
The wealth management giant, with $4 trillion in client assets, issued an internal memo to financial advisers. In the memo, Morgan Stanley announced that they would open three funds that allow ownership of bitcoin. Two of the three funds on offer will come from crypto firm Galaxy Digital. Galaxy is a crypto firm founded by former Fortress Investments CIO Mike Novogratz. Meanwhile, the third fund is a joint program between FS Investments and bitcoin company NYDIG. Access to the Galaxy Bitcoin Fund LP and FS NYDIG Select Fund requires a minimum investment of $25,000. Meanwhile, the Galaxy Institutional Bitcoin Fund LP carries a $5 million minimum.
‘Aggressive Risk Tolerance’
The decision is a significant step towards the legitimacy of the cryptocurrency. Previously, clients reportedly demanded that Morgan Stanley provide exposure to Bitcoin. Since 2017, Wall Street firms are under pressure to join the trading of Bitcoin and other cryptocurrencies.
Still, Morgan Stanley is taking a cautious approach. It will not offer its funds to all of its clients. Instead, the bank will only invite clients that have an “aggressive risk tolerance” to consider investing in crypto. In addition, they must have at least $2 million parked in the firm. For investment firms, they need at least a $5 million kitty at Morgan Stanely to qualify for the funds. Both firms and individual accounts must be at least 6 months old. Finally, MS will set limits of 2.5% of their total net worth, according to the sources. As early as next month, clients can start investing. For now, MS financial advisors will need to complete training courses related to the new funds.
Rise of Bitcoin
Bitcoin continued it's stellar 2020 run this year, doubling in value from its lowest price of $30,854.70 last January 27 to its March 14 closing high of $60,743.04. Last year, bitcoin surged from a low 5165.25 during the first few days of the pandemic and ended up at $28,990 during the last day of the year. In fact, many analysts expected JP Morgan to start the ball rolling with Bitcoin trading. Earlier this, JP Morgan predicted that if demand continues, Bitcoin prices can shoot to $146,000.
However, the Treasury remains resistant to its charms. Treasury Secretary Janet Yellen remarked that Bitcoin is extremely inefficient as a way to conduct transitions. She issued a warning last February 22 about the dangers that bitcoin poses both to investors and the public.
Watch the CNBC News video reporting that Morgan Stanley will offer select clients access to bitcoin funds:
Now that Morgan Stanley started the move of big banks to Bitcoin, do you think other banks will follow soon? Or, can they afford to wait and see what happens? Let us know what you think about Bitcoin’s next journey into the mainstream. Share your thoughts below.