Morgan Stanley called bitcoin a speculative asset - not a currency

Morgan Stanley called bitcoin a speculative asset - not a currency
Morgan Stanley analysts pointed to bitcoin trading as a speculative asset, not a currency
Analysts at the investment bank noted that the first cryptocurrency is not isolated from the traditional financial system because its price is supported by bank liquidity in U.S. dollars

Morgan Stanley noted that bitcoin is traded as a speculative asset, not as a currency, CoinDesk wrote with reference to the bank report. It said that in the midst of uncertainty last week, bitcoin fell in the price instead of showing growth amid the problems of traditional banks.

The situation with the bankruptcies of three banks in the U.S. should have been a "bitcoin moment," because holders of the asset in private cryptocurrencies are protected from counterparty risks, the report said.

Analysts noted that bitcoin was created to store value and make transactions without intermediaries, but in practice, the leading cryptocurrency "is not isolated from the traditional banking system." This is because the price of bitcoin is backed by "bank liquidity" in U.S. dollars, making BTC trading akin to trading a speculative asset rather than a currency.

Although the bitcoin network can operate without banks, the price of the asset and therefore its purchasing power is still dependent on "central bank" policies and it needs traditional banks to bring liquidity to the cryptocurrency market, Morgan Stanley said.

Bitcoin rose nearly 20 percent on March 14 after U.S. officials said they would support the banking sector, but last week, in the midst of uncertainty, BTC fell along with risky assets and bank stocks, trading as a speculative asset, the report said.

"If bitcoin had traded in line with its core value proposition - 'the ability to be your own bank' - then its exchange rate would have risen amid growing banking uncertainty," Morgan Stanley experts said.

In their opinion, the dynamics of bitcoin indicated that the rally at the beginning of the week was caused by a small number of market participants and, probably, liquidation of short positions contributed to it, but not "fundamental changes in the dynamics of trading," believe the bank.

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