[2017-06-15] MORGAN STANLEY: Bitcoin isn't a currency

[BurstIncomeAsset]

 Bitcoin may have appreciated 300% in the last 12 months, but Morgan Stanley still isn't convinced the cryptocurrency will be a viable currency in the long run.

In new research published this week, analysts at the bank say that bitcoin (and its counterparts like ethereum) are still more like investment vehicles than fiat currency that you could spend on goods and services. In addition, it said there are few reasons to use bitcoin instead of a debit or credit card, as it represents a "marginally more inconvenient way to pay."

Here's Morgan Stanley:

    Most regulators and investors view cryptocurrencies more as assets than actual currencies. Their values are too volatile and too hard to actually use for payment for most to consider them currencies. Our conversations with some merchants indicate that, while cryptocurrencies might actually be attractive for them to operate their businesses, they find that the cryptocurrencies are far too volatile to be used.

Bitcoin price 12 months june 14 The price of bitcoin has exploded in the past year. Markets Insider

The huge rise in the price of bitcoin is perplexing to the bank, which says other factors should have brought bitcoin's value down. These include the SEC's rejection of a bitcoin ETF proposed by the Winklevoss twins, declining trading volumes, and a Chinese crackdown on bitcoin miners, without which the processing time for transactions would substantially increase.

"It is not clear why cryptocurrencies are appreciating so rapidly (apart from the appreciation itself drawing in more speculation against a potentially inefficent ability to sell)," the bank said in a note.

Still, Morgan Stanley has some guesses as to why bitcoin has seen such a catastrophic rise:

    ICO's, or Initial Coin Offerings: Instead of traditional public offerings or funding rounds, a handful of companies have begun offering investors digital tokens in exchange for cash. In on high-profile case, a tech startup called Aragon raised $12.5 million in less than 15 minutes in its ICO.
    China: There are strict limits on currency outflows in the country, and Morgan Stanley assumes many people are using cryptocurrencies as a way to bypass the limits.
    Korea and Japan: Bitcoin was just legalized by the Japanese government, so it makes sense that it would be gaining popularity in the contry. "In Korea, however, there is not a clear explanation for the surge," the bank writes.

 
http://www.businessinsider.com/bitcoin-price-confounds-morgan-stanley-analysts-2017-6

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[LuanX3]

I partly agree. Bitcoins are not like the USD, EUR, or GBP. They are not backed up by gold or any state, hence there is expected fluctuation. We are not paying money here but investments whenever we use bitcoins for payments. That is why probably they concluded this is not a currency but an investment.

[Eminem23]

I partly agree. Bitcoins are not like the USD, EUR, or GBP. They are not backed up by gold or any state, hence there is expected fluctuation. We are not paying money here but investments whenever we use bitcoins for payments. That is why probably they concluded this is not a currency but an investment.

The decree currency is now also not backed by gold.
But, I also agree - bitcoin is hard to call currency. It is more than a currency. Bitcoin is used by many to invest and as a payment system

[richardsNY]

Like seriously, when will this 'Bitcoin is this or that' nonsense stop? Bitcoin is a multifunctional tool can be used in various ways, it just depends on what the person at that time requires from Bitcoin. If you want, you can transfer value from one country to another, basically instantly. Bitcoin can function as a tool that allows people to hedge basically anything connected to the centralized economy that we are participating in. It could be a solid investment option as well -- you name it, and the possibility is there.

[Carlton Banks]

Violence-backed (aka "fiat") currencies fluctuate too, but consistently downwards.

It's curious how Morgan Stanley fail to mention this contrast (fiat loses purchasing power while Bitcoin gains purchasing power), but it's not like Morgan Stanley are in biased position of being in the business of issuing newly created fiat currency in the form of credit loans.... oh no, wait, they are in that biased position, my bad

[TravelMug]

Oh well, what do you speak from someone. Morgan Stanley is a fiat back bank. Of course, they will be anti bitcoin and will not believed on its true potential. They will only see the negative aspect of it. And for the currency status, it depends on the individual using bitcoin. Some treated it as a commodity while others see it as currency. To each its own.

[1Referee]

I don't see Bitcoin as currency, so for me this doesn't change anything. I only care about the store of value aspect, and how decentralized Bitcoin is. I use Bitcoin to store a large portion of my wealth outside the reach of these greedy bastards, and in that regard, Bitcoin is doing its job exceptionally well - that's all I need from Bitcoin. It's just the regular load of bankish gibberish, next...

[aso118]

I partly agree. Bitcoins are not like the USD, EUR, or GBP. They are not backed up by gold or any state, hence there is expected fluctuation. We are not paying money here but investments whenever we use bitcoins for payments. That is why probably they concluded this is not a currency but an investment.

No currency is backed by gold these days. They are just backed by the economic (and military) might of states.
One reason why I agree that Bitcoin looks more like an investment vehicle is the high transaction fees. You don't have that with fiat.

[bbc.reporter]

Violence-backed (aka "fiat") currencies fluctuate too, but consistently downwards.

It's curious how Morgan Stanley fail to mention this contrast (fiat loses purchasing power while Bitcoin gains purchasing power), but it's not like Morgan Stanley are in biased position of being in the business of issuing newly created fiat currency in the form of credit loans.... oh no, wait, they are in that biased position, my bad

That is very true. But about the fluctuations of bitcoin, do you think a price of more than 10,000 dollars per bitcoin be good enough to make 500 to 1000 dollar fluctuations look like a small drop in its value? That might also make it look more stable.

[Carlton Banks]

@bbc reporter

Yes. But the fluctuations at the $10,000 price point will simply be commensurately larger ($1000-2000, say), or at least that's what has always happened.


This is the "new normal", or more accurately, the "old normal".

Prior to the 20th century (when commodities markets were entirely monopolised by financial corporatism), prices of goods were incredibly variable, even within relatively small geographic areas. This is partly because of the information gap that existed, but is also a reflection of the relative freedom that existed for individuals to set their own prices. Centralised commodities markets completely changed that, and are, in essence, an unspoken worldwide system of communist economics.

Centralised commodities markets are the real reason for so-called "price stability" in any asset. What's really happening is that the rich and powerful are rigging an otherwise free floating price. Sure, the supply-demand dynamics are all changing for real in the background, but the powers that be keep prices propped up (or held down) artificially for as long as is convenient to their various causes, then they allow them to drop or rise spectacularly, and label the artificial price phenomenon they created "boom and bust".


Bitcoin cannot be controlled easily on the supply side. That's the real reason for Bitcoin's wild swings IMO: this is actually real market dynamics, not the carefully orchestrated fakery that we have come to accept as genuine market dynamics.

[HTracer]

I think that in a way they ask authority for an official permission to enter into bitcoin or a guarantee not being punished for that.  There is growing risk appetite for crypto. However Morgan Stanley has to comply with rules as any Wall Street entity.

Looks like... these guys get bored of converting string to number in "pure magic code" from Fed as well as parsing FOMS minutes and want somesthing new.

[spoon-bender]

"It is not clear why cryptocurrencies are appreciating so rapidly (apart from the appreciation itself drawing in more speculation against a potentially inefficent ability to sell)," the bank said in a note. "


This sounds like Morgan Stanley is describing an exodous to me.  Fluid dynamics and heat energy transfer equations might be a better way to describe what is happening. 

My employer uses bitcoin as a payment system.  Works just fine.

[dillpicklechips]

I partly agree. Bitcoins are not like the USD, EUR, or GBP. They are not backed up by gold or any state, hence there is expected fluctuation. We are not paying money here but investments whenever we use bitcoins for payments. That is why probably they concluded this is not a currency but an investment.

The decree currency is now also not backed by gold.
But, I also agree - bitcoin is hard to call currency. It is more than a currency. Bitcoin is used by many to invest and as a payment system

As they say, it somewhat acts like a currency since it is used in transactions but mot actually a currency since Bitcoin is kinda vague if you somehow refer to the definition by the dictionary and to the law. Though in Japan and soon Australia, it is legalized and defined by the law and accepted as a currency. But I agree that it is more like an investment though it is kinda off like an investment used in transactions like you transfer an investment in order to pay someone or to what purpose. I still go for Bitcoin as a commodity since I think it is the term that is much suitable to use.