Morgan Stanley: hedge funds, VCs fuel $6.4 billion rise in crypto in 2018

Morgan Stanley

Hedge funds, venture capital firms and a smattering of private
equity houses have helped the overall number of cryptocurrency
funds increase by more than 11% in 2018 alone, Morgan Stanley
estimates. 

The US bank charted the rise in the bar chart on the left. From
only 45 cryptocurrency funds in 2016, the number has soared to an
estimated 220 this year.

In a note dated October 31, Morgan Stanley mapped the gains of
crypto assets, noting that the value of assets managed at these
funds has soared to $7.1 billion, from only $675 million at the
beginning of January 2017. That’s a $6.4 billion boom in crypto
assets under management in under two years.

It could have been even higher, says Morgan Stanley. 

“From our client conversations we find three major obstacles
preventing large scale investment in the cryptocurrency space,”
analysts at the bank said. They are:

• Underdeveloped regulation so asset managers don’t want
to take on the reputational risk

• Lack of a custodian solution to hold the cryptocurrency
and private keys

• Lack of large financial institutions and asset managers
currently invested,” the bank said in the report.

Morgan Stanley said in the report that its “Rapidly Morphing
Thesis”  — which tracks what it believes will be crypto’s
most prominent usage — is now that bitcoin and other cryptos will
act as a “new institutional investment class.”

Previous incarnations of the thesis have seen crypto as a
“replacement for existing payment systems,” a “store of value,”
and a “refuge for depreciating currency.”