Morgan Stanley will facilitate Bitcoin exposure for wealthy clients in an offering that may open the door for broader Bitcoin offerings going forward. Deutsche Bank has expressed interest in Bitcoin and announced plans to custody digital assets for its clients. Yields surge as inflation concerns continue. Consumer spending is increasing, signaling a broader economic recovery.
Financial Institutions Continue Forming Stances On Bitcoin
Morgan Stanley has announced plans to grant select clients exposure to Bitcoin. Clients will gain exposure from access to funds which hold Bitcoin as an underlying asset. Initially, the investment vehicle will only be available to certain accredited investors and investments will be limited to 2.5% of clients’ net worth. Last week, Deutsche Bank released a report calling Bitcoin “too important to ignore.” The report cautions investors that the currency is still volatile and carries unique risks. The firm pointed out that "in terms of total currency in circulation, Bitcoin is the third-largest in the world, after the U.S. dollar and the Euro.” Deutsche Bank is developing a “fully integrated custody platform for institutional clients and their digital assets.” Bank of America released a report broadly advising against Bitcoin as an investment. The firm cited volatility as undermining the currency’s ability to act as a store of value, and claims that prices are driven purely by speculation. The report indicates a lack of understanding around how Bitcoin works, including inaccurate statements regarding technical aspects of Bitcoin custody and transactions.
Investors Anticipate Significant Inflation As Consumer Spending Picks Up
Yields continue to surge as investors demand higher nominal returns due to inflation concerns. 10-year treasury yields reached 1.75%; the highest levels since the start of the COVID-19 pandemic. The rising yields come despite statements that the Fed will likely hold interest rates near 0% through 2023. The S&P 500 was down slightly last week, whereas the Nasdaq posted modest gains. Consumer spending is picking up rapidly across many parts of the economy, particularly travel, hospitality, dining, gyms, and salons. This trend is likely to continue as economic restrictions are lifted following a year of record private savings.
Several States Are Clamoring to Lead Cryptocurrency Innovation
Kentucky passed two bills intended to incentivize cryptocurrency mining in the state. The bills include tax breaks on energy used for mining and on mining profits. Kentucky hopes to make itself an attractive spot for cryptocurrency miners in order to generate jobs and boost its economy. Miami’s Mayor Francis Suarez continues pushing for Bitcoin adoption in the city, as part of a plan to make Miami a tech hub of the nation. Specifically, the city will let certain workers receive their salaries in Bitcoin, and all residents will be able to pay taxes with Bitcoin. Suarez has reportedly received inquiries from other cities looking to follow Miami’s lead. Miami-based JAG Insurance Group announced an insurance policy which can be purchased using cryptocurrency. The Oakland Athletics are now accepting Bitcoin as payment for certain tickets, in an effort to drive sales. Brazil authorized a Bitcoin ETF in the country, making it the second region in the western hemisphere to do so.
Major financial institutions continue acknowledging the importance of Bitcoin in the global economy. Although there are mixed sentiments, financial institutions are generally positive on Bitcoin as an investment or means of transacting. Yields have reached pre-pandemic levels, as markets signal strong anticipations of inflation. This increase comes despite the Fed’s guidance of prolonged loose monetary policy.