Morgan Stanley Eyes Bitcoin Market via GBTC and Cash Settled Futures on Its European Fund

Morgan Stanley Eyes Bitcoin Market via GBTC and Cash Settled Futures on Its European Fund

  • Bitcoin
  • January 10, 2023
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Morgan Stanley warned that the value of GBTC may drop ‘precipitously’ to zero due to regulatory changes, a crisis of confidence, a flaw, or an operational issue in the Bitcoin network.

Morgan Stanley (NYSE: MS) has announced that its European Fund has set aside cash to invest in the Bitcoin market. According to its annual shareholder’s report filed on January 5 to the SEC, the company’s European Opportunity Fund has made a deliberate attempt to invest in the volatile crypto market via cash-settled futures or indirectly through Grayscale Bitcoin Trust (GBTC).

Following the announcement, MS shares have gained approximately 2.24 percent in the past five days to trade at around $87.77 during Monday’s after-hours. The global investment bank with over $6.5 trillion in assets under management reportedly purchased $3.6 million worth of GBTC on behalf of its customers.

“The Fund may, consistent with its principal investment strategies, invest up to 25% of its total assets in a wholly-owned subsidiary of the Fund organized as a company under the laws of the Cayman Islands, Europe Opportunity Cayman Portfolio, Ltd. (the “Subsidiary”). The Subsidiary may invest in bitcoin indirectly through cash-settled futures or indirectly through investments in Grayscale Bitcoin Trust (BTC) (“GBTC”), a privately offered investment vehicle that invests in bitcoin,” the SEC filings noted.

Nonetheless, the company warned that the value of GBTC may drop ‘precipitously’ to zero due to regulatory changes, a crisis of confidence, a flaw or operational issue in the bitcoin network, or a change in user preference for competing cryptocurrencies.

Furthermore, Grayscale’s parent company Digital Currency Group is distressed following significant exposure to FTX and Alameda implosion. Notably, Grayscale holds approximately 653,633 bitcoins for private investors, thus a major crypto whale.

Morgan Stanley Joins Institutional Investors Eying Bitcoin and Crypto Market

Morgan Stanley has entered the crypto market to diversify its portfolio against poor performance in the stock market around the world. However, the risks associated with the crypto market have exponentially increased in the past few months. Moreover, Grayscale’s parent company DCG is at risk of bankruptcy, which could send the crypto market further down in the coming months.

Arcane Research said:

“In short, if DCG enters bankruptcy, the company could be forced to liquidate its assets. This could force DCG into selling its sizable positions in GBTC and unknown positions in ETHE and other Grayscale trusts.”

Mind you, Gemini has accused DCG’s Genesis Trading of defaulting $900 million payment to its Earn Program customers.

Nonetheless, Morgan Stanley and other large banks around the world have shown a long-term interest in the Bitcoin and blockchain market. Furthermore, regulators across the world are drafting policies to adopt Bitcoin as an asset class.

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Steve Muchoki

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