Morgan Stanley offering its wealthy clients access to bitcoin funds is the "tip of the iceberg for Wealth Management," JMP securities said in a research note.
On Wednesday, Morgan Stanley announced that it will allow rich clients with "an aggressive risk tolerance" and at least $2 million in assets held by the firm to gain exposure to bitcoin — a first for a major US bank. These clients will be able to invest up to 2.5% of their net worth into the bank's funds.
Devin Ryan, an equity research analyst at JMP Securities, said that Morgan Stanley's announcement will serve as a catalyst for other banks to follow suit.
"Motivations range from missing the opportunity at best, or at worst, seeing business disruption if clients decide better alternatives exist, which could negatively impact growth or competitive positioning," he said in a note.
The analyst added that around $30 trillion of assets in the U.S. retail wealth management industry currently do not have direct access to bitcoin.
"Making some assumptions, with relatively modest asset allocation exposure of 5% of a portfolio, this alone would represent $1.5 trillion of incremental capital into bitcoin, which is greater than its current market cap," he said in a note.
The same goes for wealth managers outside of the US, where Ryan added he sees substantial capital pools opening up, fueled by the same drivers, though dynamics vary by region.
Despite the growing momentum of "decentralized finance" and the rapidly growing market cap of bitcoin, he believes that the industry is still in the "very early innings of adoption." Nevertheless, "the signposts we are following are progressing both logically and broadly as anticipated, which we think is very bullish."
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