Morgan Stanley: Hedge funds and VCs fuelled a $6.4 billion gain in crypto assets in under 2 years


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 $US7.1 billion, from only $US675 million at the beginning of January 2017. That’s a $US6.4 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.”