The multinational financial services and investment bank Morgan Stanley has recently released its latest Bitcoin and cryptocurrency report. According to the document, Bitcoin and cryptocurrencies have become a ”new institutional investment class” during the last year.

The report is titled ”Update: Bitcoin, Cryptocurrencies and Blockchain” and touch on all things cryptocurrency-related. It was released on October 31 and follows a similar report published report published by Morgan Stanley in December.

However, unlike the document published in December, this report has a decidedly more bullish outlook on the burgeoning technologies.

Morgan Stanley’s review begins by examining the long-term evolution of Bitcoin, as well as how cryptocurrency investments have changed. Moreover, the document outlines the recent surge in interest for so-called stablecoins.

Morgan Stanley readying Bitcoin swap trading?

In addition to this, the report also comes complete with a brief summary of regulatory developments pertaining to cryptocurrencies. This comes as Morgan Stanley lacks a dedicated Bitcoin trading desk, but has previously opened the door for derivative trading.

More specifically, Morgan Stanley is reportedly not intending to trade Bitcoin directly – but is open to offer Bitcoin swap trading tied to futures contracts.

Furthermore, Bloomberg has reported that Morgan Stanley has already put measures in place to allow for Bitcoin swap trading. Nevertheless, Bloomberg also alleges that Morgan Stanley will not launch such a service without client demand and internal approval.

Could financial markets soon move towards cryptocurrencies?

This comes as Morgan Stanley recently claimed that Bitcoin behaves similarly to the Nasdaq around the dot-com bubble; albeit 15x faster. This notwithstanding, the bank also predicted that financial markets could soon increasingly move towards the use of cryptocurrencies.

”Over the coming years, we think that the market focus could turn increasingly towards cross trades between cryptocurrencies/tokens, which would transact via distributed ledgers only and not via the banking system.”

The report also includes statistics that support the claim that institutional investors are becoming increasingly involved with cryptocurrency.

Bain Capital’s $15 million Series B funding round for Seed Cx Institutional Trading Platform, Coinbase’s $8 billion valuation, and Goldman and Sachs & Galaxy Digital’s $58.5 million investment in BitGo were some of the circumstances raised.

Cryptocurrency-related challenges

Nonetheless, the report also outlines some challenges that remain for cryptocurrencies to overcome. More specifically, the relative lack of a stable and coherent regulatory framework is of special concern, according to the report.

In addition to this, the document also raises energy consumption as an issue that could potentially spell trouble. Moreover, it goes on to note that banks’ responses to Bitcoin have, in general, so far been ”limited”.

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