Morgan Stanley Bitcoin bet: Up with MicroStrategy, down with Grayscale

Last year, as the Bitcoin bull market raged to parabolic highs, funds owned by Morgan Stanley began buying shares of Grayscale Bitcoin Trust (GBTC) in relatively large volumes. At one point, funds managed by Morgan Stanley owned as much as 13 million GBTC shares. Morgan Stanley funds currently hold around 11 million shares at a loss of at least 33%.

The firm began buying GBTC in 2019 but bought the majority in last year’s bull market. Some of the investment company’s funds have also recently sold some of their GBTC at a loss. Indeed, funds managed by Morgan Stanley which hold GBTC are all down this year with Morgan Stanley Insight Fund Cass A down more than 50%.

The fund started the year with 1,734,013 shares and sold 332,627 at the start of the bear market. It then sold 183,457 shares at a loss in the second quarter, ending with 1,217,929 GBTC shares.

However, despite buying the Bitcoin top and holding the GBTC bag, Morgan Stanley seems to have profited from the Bitcoin bull market with another of its trades. As of 2020, the company had bought more than 10% of MicroStrategy, ending the year with 845,786 shares. It sold most of these shares across 2021 as MicroStrategy’s price increased parabolically along with Bitcoin.

As of today, Morgan Stanley appears to own a small amount of MicroStrategy shares in its funds, with the Morgan Stanley Insight Fund owning up to 41,508 shares, and the Morgan Stanley Institutional Fund Trust owning 25,469.

Morgan Stanley has also purchased up to $9,702,000 in MicroStrategy bonds with a coupon of 6.125%, maturing on June 15, 2028. The value of its MSTR bonds is down from its principal and is currently valued at a total of $8,392,675.

Read more: Are big players like Grayscale and MicroStrategy moving bitcoin’s price?

Morgan Stanley’s foray into Bitcoin may not be a short-term opportunistic bet, as in recent years the firm has made various positive comments about Bitcoin and crypto. Some of Morgan Stanley’s wealth managers seem to believe that Bitcoin and crypto are here to stay, describing digital currency as “a likely permanent investment category” and “a viable asset class” with potential growth.

In June last year, Morgan Stanley argued that Bitcoin and cryptocurrencies trade as speculative assets, but did not exclude the possibility that crypto could become conventional currency in the future. Morgan Stanley has also claimed that it’s interested in buying El Salvador’s debt despite being weighed down by its own Bitcoin bet.

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