Morgan Stanley targets the Bitcoin market via GBTC and cash-settled futures on its European fund

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Morgan Stanley has warned that the value of GBTC could precipitously drop to zero due to regulatory changes, a crisis of confidence, a breach or an operational issue in the Bitcoin network.

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

Following the announcement, MS shares have gained around 2.24% over the past five days to trade at around $87.77 on Monday 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 clients.

The Fund may, in accordance with its principal investment strategies, invest up to 25% of its total assets in a wholly owned subsidiary of the Fund incorporated as a company governed by 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 private investment vehicle that invests in bitcoin , according to filings with the SEC.

Nevertheless, the company warned that the value of GBTC could precipitously drop to zero due to regulatory changes, a crisis of confidence, a breach or operational issue in the bitcoin network, or a change in user preference for competing cryptocurrencies.

Additionally, parent company Grayscales Digital Currency Group is in distress following significant exposure to FTX and the implosion of Alameda. Notably, Grayscale holds around 653,633 bitcoins for private investors, thus a major crypto whale.

Morgan Stanley Joins Institutional Investors in the Bitcoin and Crypto Market

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

Arcane Research said:

In short, if DCG goes bankrupt, the company could be forced to liquidate its assets. This could force DCG to sell its large positions in GBTC and unknown positions in ETHE and other grayscale trusts.

Mind you, Gemini accused DCG Genesis Trading of defaulting on payment of $900 million to its Earn Program clients.

Investors should pay attention to the ongoing financial difficulties related to the Digital Currency Group (DCG), as the result could have a significant impact on the crypto markets.

Learn more: https://t.co/5syXBpEw7q

— Arcane Research (@ArcaneResearch) January 4, 2023

Nonetheless, Morgan Stanley and other major banks around the world have shown long-term interest in the Bitcoin and blockchain market. Additionally, regulators around the world are developing policies to adopt Bitcoin as an asset class.

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