Most members of the investment community seriously underestimated the future of cryptocurrencies when Bitcoin was first conceived. If you take a look at the original white paper that the anonymous inventor/s of Bitcoin, Satoshi Nakamoto, published in 2009, you will see that there was more than a little skepticism in many of the comments. Most people continued to doubt the sustainability of the world's first digital currency for four years after it was first published.
That skepticism has since been quashed. Mainstream investment institutions, such as Morgan Stanley believe that cryptocurrencies are going to play an essential role in the future of the financial industry.
How influential will cryptocurrencies be and how will this impact entrepreneurs in the cryptocurrency industry?
Morgan Stanley publishes insightful report on cryptocurrencies
A couple of weeks ago Morgan Stanley published an unexpected report about the state of the digital currency market. This report states that institutional investors are increasing their holdings of bitcoin and other digital currencies. Coin Telegraph wrote a brief synopsis of the report, paraphrasing:
"Researchers also stayed positive on decentralized technology, describing it as making the world "better." The document stands out in its positive nature, and marks one of the strongest signals yet that Wall Street is swiftly becoming enamored with Bitcoin in particular. In discussing their own entry, investment giants have routinely highlighted client demand as motivating them to engage with the industry."
The timing of this report was surprising. The cryptocurrency market has been bearish for the past two years. Nevertheless, experts from Morgan Stanley and other large financial institutions are surprisingly optimistic with their outlook. They expect to increase their holdings significantly in the next few years.
Morgan Stanley isn't the only large financial institution that is optimistic about the cryptocurrency market. Over the past year, there have been a number of rumors that Goldman Sachs is launching a trading desk for Bitcoin and other digital currencies. Although this particular rumor was later refuted by the CEO of the global investment bank, Goldman Sachs did acknowledge investing in a third-party cryptocurrency trading desk in 2015.
The most recent report from Morgan Stanley shows that institutional investors are even more optimistic about the market now than they were when Goldman Sachs first invested in the trading desk.
What does this mean for cryptocurrency entrepreneurs?
Cryptocurrency entrepreneurs should be pleased that institutional investors are investing more heavily in digital currencies. Even a number of startups in smaller jurisdictions such as Malta have begun investing in crypto technology and developing new solutions for traders.
The growing interest among institutional investors will make it easier for crypto startups to raise capital. Many startups in the technology sector have struggled to attract funding since the end of the recession. Crypto startups appear to be faring better, because they have received a lot of positive publicity. The crypto market may currently be a bubble, but they are currently benefiting from the massive exposure. Unless the bubble bursts in the very near future, new digital currency startups will have a massive edge and receiving new capital.
However, the increased publicity end is up raising capital comes at a cost. Greater adoption of digital currencies increases the risk of market manipulation and makes it easier for criminals to launder money. As a result, financial regulators will be more likely to develop stricter policies. Although these policies will primarily be targeted towards trading platforms, all entrepreneurs that depend on digital currencies will be affected by them.