Key Takeaways
Why is Morgan Stanley expanding its exposure to BTC?
It views Bitcoin as “digital gold” with strong long-term growth potential and diversification benefits.
What is the likely impact of the update?
Per Bitwise CEO, it’s a “huge” development that could drive crypto mainstream.
Morgan Stanley has doubled down on Bitcoin [BTC] to diversify its clients’ wealth growth.
In its latest guidance, the firm’s Global Investment Committee (GIC) recommended that financial advisors and clients maintain a 2%–4% Bitcoin allocation. According to the analysts, BTC is like digital gold, calling it “scarce.”
The firm added that the BTC holdings, via ETFs, could be rebalanced quarterly or yearly to handle volatility.
Source: Morgan Stanley
Reacting to the update, Bitwise CEO Hunter Horsley called it “huge” and added,
“GIC guides 16,000 advisors managing $2 trillion in savings and wealth for clients. We’re entering the mainstream era.”
For his part, Chris Burniske, VC partner at Placeholder and former Ark Invest crypto lead, cautioned that Morgan Stanley must be ready for BTC wild swings.
“MS will now advise normies add a 2-4% crypto allocation, hope they’re strapped in bc this roller coaster goes both ways.”
Institutional growth in BTC ETFs
In Q3 2024, Morgan Stanley first opened up to BTC ETFs, restricting them only to wealthy clients with at least $1.5 million and an “aggressive risk tolerance.”
It was not clear whether the latest recommendation extended to other clients with less than $1.5 million. But Burniske’s “normies” comment suggested the latest update could cover even less wealthy individuals.
The firm advised 2% BTC allocation for ‘balanced growth’ and 3-4% for market or opportunistic returns.
Interestingly, Morgan Stanley recently partnered with ZeroHash to offer crypto to its retail clients on its E-Trade platform by 2026.
In the long run, the potential demand from the wealth manager could fuel BTC’s rally. In fact, the Uptober run to $125K was partly fueled by the ETF flows.
ETF flows underpin Bitcoin’s rally
Notably, institutional investors owned about $33.5 billion of BTC ETFs as of August, according to Bloomberg ETF analyst James Seyffart. And the list was dominated by advisors.
Source: Bloomberg
The $33.5 billion was about 25% of the total institutional share of BTC ETF, up from 21.9% in Q1. The rest (75%) was still retail, but institutional interest has been steadily increasing.
Per Q2 filings with the SEC, Morgan Stanley owned about $187 million of BlackRock’s iShares Bitcoin Trust (IBIT) and was among the top-five holders.
That said, the U.S spot BTC ETF products raked in $3.24 billion in Net Inflows last week, coinciding with the cryptocurrency’s jump to a new ATH of $125K.
Source: Soso Value
Hence, the latest wave of wealth advisors deepening exposure to BTC could further increase the ETF inflows and lift BTC higher.
Even so, Morgan Stanley added that crypto exposure is optional and risk-oriented.
