Morgan Stanley will soon offer a way for its clients to trade derivatives tied to the price Bitcoin, it has been reported.
The bank’s plans were revealed to Bloomberg by an unknown source after months of speculation in the space. Its report states that investors will soon be able to make use of complex ‘price return swaps’, which will allow both long and short positions on the crypto. Morgan Stanley will profit via a spread.
An internal approval process is the first step, the informant added, and the bank will then launch Bitcoin trading once it decides demand is high enough.
The firm’s market strategist previously compared the perceived weakness of Bitcoin to that experienced during the Dotcom boom, but at 15x the speed.
Despite this positive step forward, it should be noted that Morgan Stanley will not directly trade Bitcoin, but rather deal in Bitcoin futures contracts. This lines up with comments previously made by CEO James Gorman, who denied the bank would allow customers to buy and sell the coin through Morgan Stanley.
Kevin Murcko, CEO of crypto exchange CoinMetro, commented: “Today’s news that Morgan Stanley is to open up Bitcoin swap trading is unsurprising; readers may remember that the bank had already announced its intentions back in January of this year. The demand from core institutional clients clearly hasn’t waned.
“The immediate impact on the price of Bitcoin is likely to be minimal. This is an unofficial announcement of an announcement about a synthetic instrument only loosely tied to Bitcoin’s market value. Nevertheless, it’s worth keeping in mind that in the long term, this is all good for the space. Morgan Stanley’s move bolsters Bitcoin’s growing credibility. The decision will also drive the need for additional regulation and security improvements, as clients will expect to be covered by the same protections offered in more traditional markets.”
Though the matter has since been complicated by various comments and denials, Goldman Sachs is thought to be planning a similar move by setting up one of Wall Street’s first Bitcoin trading operations.
On the topic of introducing cryptocurrencies into the finance world in this way, Goldman executive Rana Yared said: “I would not describe myself as a true believer who wakes up thinking Bitcoin will take over the world,” adding that, “For almost every person involved, there has been personal skepticism brought to the table.”