- Morgan Stanley is likely to gain exposure to Bitcoin through Grayscale’s GBTC.
- This move aligns with the bank’s investment strategy and further boosting the Bitcoin ETF hype.
The Morgan Stanley Opportunity Fund is reportedly set to allocate up to 25% of its total assets to Bitcoin (BTC) through the Grayscale Bitcoin Trust (GBTC). This historic development comes as anticipation grows for the potential approval of Bitcoin spot Exchange-Traded Funds (ETFs) applications in the United States by the Securities and Exchange Commission (SEC).
Morgan Stanley’s Strategic Bitcoin ETF Move
Evidence of this pivotal move surfaced as Morgan Stanley filed a new N-CSR (annual shareholder report) for its actively traded Morgan Stanley Opportunity Fund.
Renowned crypto commentator, MartyParty shed light on the specifics, stating that the fund may invest up to 25% of its assets in a wholly-owned subsidiary named Europe Opportunity Cayman Portfolio, Ltd. This subsidiary, organized under the laws of the Cayman Islands, holds the potential to indirectly invest in Bitcoin through cash-settled futures or investments in GBTC.
Breaking: @MorganStanley registers new N-CSR (Annual shareholder report) for their traded Morgan Stanley Opportunity Fund with new text that they can allocate 25% of the fund to Bitcoin through @Grayscale $GBTC. 👀👀
The Fund may invest up to 25% of its total assets in a… pic.twitter.com/33sy2oKE2B
— MartyParty (@martypartymusic) January 2, 2024
MaryParty emphasized that the fund, acting as the sole shareholder of the subsidiary, emphasized that the shares are not expected to be sold or offered to external investors. The report outlines the fund’s intention to invest approximately $140 million in the subsidiary, showcasing Morgan Stanley’s commitment to exploring the potential of the digital asset market.
The move aligns with Morgan Stanley’s broader strategy of gaining exposure to commodity markets within the constraints defined by Subchapter M of the Internal Revenue Code and recent Internal Revenue Service (IRS) revenue rulings. These regulations stipulate that a mutual fund must limit its gross income derived from such investments to ten percent to qualify for favorable tax treatment as a Regulated Investment Company (RIC).
However, the report emphasizes the vulnerability of the fund to changes in legislation, regulations, or other legally binding authorities. Any alterations to the tax treatment of income received from the subsidiary could necessitate remarkable adjustments to the investment strategy, potentially impacting the fund adversely.
Morgan Stanley’s Interest in Bitcoin Investment
Morgan Stanley’s move to explore indirect Bitcoin investment opportunities reflects the increasing interest in cryptocurrencies among institutional investors. The potential allocation to Bitcoin through a wholly-owned subsidiary underscores the institution’s recognition of the benefits and opportunities presented by the digital asset.
Notably, Morgan Stanley had advised investors to consider including Bitcoin in their portfolios, citing the end of the crypto winter and anticipating a positive market sentiment around the halving event in April. While the report doesn’t provide a long-term price target, it suggests that Morgan Stanley expects Bitcoin’s price to rally beyond its all-time high post-halving, based on historical performance in past bull rallies.
As of the time of writing, Bitcoin is trading at $45,343, reaching a one-year high of $45,900 on Tuesday. The cryptocurrency has witnessed a substantial surge of over 6.86% in the past seven days, boasting a market cap of $888.6 billion and a trading volume of $31.3 billion.
