We spoke to three Morgan Stanley trade desk sources regarding the news from Bloomberg that the global investment bank was set to begin offering clients a ‘synthetic’ Bitcoin product and the conversations were ‘illuminating’ to say the least.
**A brief description of a Morgan Stanley trade desk dude – early 30’s, unmarried, adrenaline-addicted, and in a constant search for volatility to produce market-beating performance and year-end bonuses. Good, got that out of the way.**
These three guys are all well versed in cryptocurrency lingo and practice, as each was able to produce proof that they owned cryptos. We promised to keep their identities anonymous.
One trader talked about the lust for volatility: “Price movements are everything for a trader. The larger the swings the better. As we execute or either the firm or institutional clients, the more volatility the better. If pushes action in large accounts and keeps emotions on edge. Even the choppy movement in the equity indexes over the past three months have been useful in that regard. But cryptos…wow, dude. The volatility in Bitcoin alone would be better than sex for us! Movements of 10%-20% over the course of 24 hours. Huge!
Another trader echoed the profit potential: “Just take the idea that these things trade 24 hours a day and seven days a week. That alone would create renewed profitability on trade desks everywhere. And, of course, the volatility would make bank execs wet. That is why bean counters (lawyers) here are working overtime trying to quantify risks and policies to get us on, at a minimum, Bitcoin, and eventually Ethereum.”
Our final contact kept things short: “Give me all of the cryptos and watch what I could do for this place. Clients won’t stop asking about them. I’ve not seen anything like this in my career. I’ve heard, from oldheads, what it was like in 98-99 with the dot-com bubble. But even those guys say this is bigger and more emotionally driven. We’d make a sh** ton if we had access, institutionally speaking.”
These comments and the Bloomberg scoop this morning from Alistair Marsh have set off another round of institutional FOMO:
“Morgan Stanley plans to offer trading in complex derivatives tied to the largest cryptocurrency, according to a person familiar with the matter, joining other Wall Street firms in creating ways for clients to play the digital currency market.”
“The U.S. bank will deal in contracts that give investors synthetic exposure to the performance of Bitcoin, said the person, who asked not to be identified because the information is private. Investors will be able to go long or short using the so-called price return swaps, and Morgan Stanley will charge a spread for each transaction, the person said.”
“The bank is already technically prepared to offer the Bitcoin swap trading, and will launch once there is proven institutional client demand and after the completion of an internal approval process, the person said. A spokesman for Morgan Stanley declined to comment on the initiative.”
Every major institution that has an interest in satisfying the requests of its biggest clients and generating outsized trading profits with significant margins is offering or planning to offer access to Bitcoin and cryptos. Everybody.
It is no longer ‘Institutional FOMO’, but rather Institutional Adoption.