For growth portfolios, Morgan Stanley advises up to 4% cryptocurrency investment

Morgan Stanley analysts advised prudent exposure for its model portfolios of 1% to 2% for income and balanced growth strategies and up to 4% for portfolios centered on "opportunistic growth" in a study released by the Global Investment Committee in October.

"We want to support our Financial Advisors and clients, who may flexibly allocate to cryptocurrency as part of their multi-asset portfolios, even though the GIC allocation models will not include explicit allocations to cryptocurrency," the report said.

Because they see Bitcoin as a rare asset that is "akin to digital gold" and has long-term value in diverse portfolios, Morgan Stanley analysts are mainly focused on it. At the same time, they suggested that financial advisers adopt a "conservative approach" because of the asset class's volatility history and propensity to move in tandem with larger markets in stressful situations.

According to the authors, "GIC advises Financial Advisors and clients to rebalance multi-asset portfolios with cryptocurrency allocations on a regular, periodic basis: preferably quarterly or at least annually." Rebalancing could help prevent excessive exposure to a single asset class over time and keep risk in line with portfolio objectives.

Hunter Horsley, CEO of Bitwise, called the research a "huge" event and said that cryptocurrencies were approaching the "mainstream era."

Here are several ways that both banks and cryptocurrency might profit from the GENIUS Act

The goal of the GENIUS Act was to clarify stablecoins, and it has done so in many respects. There is now a defined legislative framework for the first time, requiring issuers to keep transparent reserves, completely collateralize their coins with secure assets, and refrain from paying yield directly to clients. This type of clarity is important after years of ambiguity, but it has also made others snicker.

The backlash started the moment the ink dried. Banks had concerns and pushed over a loophole that would hurt their company. Banks are permitted to produce stablecoins under the new regulation, but they will not pay interest. Crypto exchanges may still provide incentives or yield on third-party stablecoins, such as USDC, in the meantime.

According to banks, this may be the beginning of a massive withdrawal of billions of dollars in deposits, which would empower cryptocurrency platforms, deprive lending institutions of money, and increase borrowing prices.

We've seen this happen before, which is why it seems familiar. Money market funds provided higher rates than bank accounts in the 1980s. The financial system adapted, banks felt the squeeze, and depositors relocated. Today, stablecoins provide a comparable shock. They are more transparent, quicker, less expensive, and, with good design, safer. Whether banks will change this time or dig in their heels is the issue.

Coinbase wants a banking charter as the price of bitcoin hits a record high

Banks do not have to lose to cryptocurrency, despite concerns and lobbying efforts. By creating their own stablecoins, banks may update their offerings without jeopardizing their ongoing operations. Banks could settle transactions instantly and integrate them across loans, payments, and even cross-border services, eliminating the need for expensive wire transfers that take days to complete. Stablecoins have the potential to improve balance sheets, diversify income streams, and retain consumers over the long haul if implemented properly.

The idea that individuals want to quit banks is the basis for the worry of a widespread "deposit flight." Customers really don't want to go. Better solutions are what are really needed. If banks are prepared to utilize them, stablecoins may provide them with such tools.