April 25, 2024

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Morgan Stanley Explores Allowing Brokers to Recommend Bitcoin ETFs, Reflecting Shift in Crypto Investment Strategy

Morgan Stanley is considering allowing its 15,000 brokers to recommend spot Bitcoin exchange-traded funds (ETFs) to customers, setting up the necessary framework for solicited purchases that would include evaluating clients' risk tolerance and setting limits on allocation and trading frequency, according to a report from AdvisorHub. Although a specific timeline for this policy shift has not been provided, Morgan Stanley, along with other major brokerages like Merrill Lynch and Wells Fargo, currently permits the purchase of these ETFs only on an unsolicited basis, where clients must initiate contact with advisors. As of the latest data, U.S.-traded spot Bitcoin ETFs from firms including BlackRock, Grayscale, and Ark Invest have seen substantial growth, amassing $12.29 billion in net inflows and managing over $53.6 billion in assets, with BlackRock's IBIT fund alone accounting for 24% of inflows across its 1,000 ETF offerings.

Canadian Financial Sector Sees Significant Rise in Cryptocurrency Adoption in 2023: KPMG Survey Highlights

The Canadian financial sector experienced substantial growth in cryptocurrency adoption in 2023, as reported by a KPMG survey. The percentage of financial firms offering crypto-related services grew by 22% since 2021, with institutional investor participation increasing by 26%. Now, half of the surveyed firms provide at least one type of crypto service, notably with 52% offering trading services compared to none in the previous survey. Direct ownership of digital assets among investors also more than doubled, with 75% holding these assets, reflecting a growing perception of cryptocurrencies as a hedge against U.S. debt and inflation issues. Regulatory progress in Canada, such as the approval of Bitcoin and Ethereum ETFs, has further bolstered the market, leading to a more diversified investment approach in financial services and heightened institutional interest, predicted to continue driving growth into 2024.

Founders of Samourai Wallet Charged in U.S. Crackdown on Crypto Mixing Services

Federal prosecutors charged the founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, with conspiracy to commit money laundering and operating an unlicensed money-transmitting business, as part of the U.S. government's crackdown on crypto mixing services used for illicit activities. According to a DOJ press release, Samourai Wallet facilitated over $100 million in money laundering transactions from dark web markets and about $2 billion in illegal transactions since its inception in 2015. The founders, who were arrested in the U.S. and Portugal, reportedly earned around $4.5 million in fees from their services. The Samourai Wallet, which promoted itself as catering to "black/grey market participants," has been seized by authorities along with its mobile application. These arrests align with broader efforts by the DOJ, which includes ongoing cases against other crypto mixer operators for similar charges.

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Trading Desk Insights

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Bitcoin retraced from its 50-day moving average as anticipated. After the pullback to the 61.8% Fibonacci retracement level, a potential rebound could be on the horizon. Significant buying orders have accumulated around $62,600, which is expected to act as a short-term support level. The market experienced pressure today following economic reports that suggested a shift from a soft landing scenario to stagflation—where economic stagnation coincides with rising inflation. Additionally, a notable Coinbase premium indicates that Bitcoin is currently trading at a discount on Coinbase, signaling diminished buying pressure from U.S. investors.

In terms of ETF dynamics, the market has transitioned to outflows totaling $120.6 million, ending BlackRock's ETF’s 71-day streak of inflows—a surprising development for market watchers.

Morgan Stanley has permitted direct customer purchases of ETFs since their inception, but it may soon authorize its 15,000 brokers to recommend Bitcoin ETFs to clients, potentially catalyzing significant inflows into these funds.

Solana's DeFi Total Value Locked (TVL) has surged by 232% QoQ to $4.9 billion, ranking it fourth among networks. Moreover, its average daily spot DEX volume has soared by 319% QoQ to $1.5 billion, establishing it as a favored platform among retail users and meme coin traders.

Stock futures declined sharply on Thursday following U.S. economic data indicating a significant slowdown in growth coupled with ongoing inflation, driving treasury yields to over 4.7%—the highest since November. U.S. GDP significantly underperformed expectations, plummeting to just 1.6%, a drastic reduction from the previous quarter’s 3.4%. Furthermore, the core PCE for Q1 jumped from 2.0% to 3.7%, significantly exceeding the 3.4% forecast.

In response to these economic indicators, traders have adjusted their expectations for Federal Reserve monetary policy, now anticipating only one interest rate cut this year according to futures markets.

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Disclaimer

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This research is for informational use only. This is not investment advice. Other than disclosures relating to Secure Digital Markets this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates, and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate.

Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

The information on which the analysis is based has been obtained from sources believed to be reliable such as, for example, the company’s financial statements filed with a regulator, company website, company white paper, pitchbook and any other sources. While Secure Digital Markets has obtained data, statistics, and information from sources it believes to be reliable, it does not perform an audit or seek independent verification of any of the data, statistics, and information it receives.

Unless otherwise provided in a separate agreement, Secure Digital Markets does not represent that the report contents meet all of the presentation and/or disclosure standards applicable in the jurisdiction the recipient is located. Secure Digital Markets and their officers, directors and employees shall not be responsible or liable for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses, or opinions within the report.

Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.

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