Welcome to Financial Advisor IQ

Merrill Lynch and Morgan Stanley Disagree on Bitcoin

July 28, 2017

A commodity and derivatives strategist at Merrill Lynch says Bitcoin may one day become a legitimate currency, likening it to gold, the Cointelgraph writes. But Morgan Stanley analysts say digital currencies aren’t likely to ever become more than investment vehicles, according to Business Insider.

Merrill Lynch’s Francisco Blanch writes in a new report that Bitcoin may be the continuation of the evolution of money from salt to silver to paper money, according to Cointelgraph. But Bitcoin and other digital currencies still face issues of safety, liquidity and return, Blanch writes, adding that no major institution currently accepts cryptocurrencies as collateral, according to the website.

Such currencies still pose risk in terms of hacking and identity theft, Blanch writes. Bitcoin is also far more volatile than the euro or gold, but Blanch writes that during two periods in 2016, Bitcoin’s volatility was actually lower than that of silver, used for centuries as a legitimate currency, according to Cointelgraph. And while liquidity in Bitcoin remains low, it has grown to $2 billion a day in trading volume, Blanche writes. What’s more, the difficulty in mining Bitcoin is behind its value, he writes, adding that it has doubled this year, according to Cointelgraph. Ultimately, Blanch writes, it’s the faith put into digital currencies by institutions and individuals that will determine Bitcoin’s future.

And at least one Swiss wealth manager is embracing the digital currency as a legitimate asset on the heels of a recent approval by the Swiss Financial Markets Supervisory Authority for use of Bitcoin in asset management, InvestmentNews writes. Falcon’s clients will be able to use their cash to trade and hold Bitcoin, according to the publication. The firm also put up a Bitcoin ATM in its Zurich headquarters for use by the company’s clients, InvestmentNews writes.

But according to Morgan Stanley analysts, Bitcoin will never become more than an asset, Business Insider writes. That’s because the value of cryptocurrencies is too volatile and they’re harder to use than, say, a debit or credit card, the analysts say. They also find Bitcoin’s soaring value puzzling, considering the SEC’s rejection of a bitcoin ETF, falling trading volume and the Chinese government’s clampdown on Bitcoin mining, Business Insider writes.

By Alex Padalka
  • To read the Business Insider article cited in this story, click here.
  • To read the Cointelegraph article cited in this story, click here.
  • To read the InvestmentWeek article cited in this story, click here.