Morgan Stanley has issued recommendations for cryptocurrency allocations in diverse portfolios, advocating a cautious strategy in a recent Global Investment Committee (GIC) report shared with investment advisors.

The financial advisors from Morgan Stanley suggest a maximum of 4% allocation for digital currencies within ‘Opportunistic Growth’ portfolios, which are aimed at higher risk and reward scenarios. In contrast, they advise a maximum of 2% in ‘Balanced Growth’ portfolios, which carry more conservative risk profiles. Furthermore, the report proposes a 0% allocation for portfolios that prioritize wealth preservation and income.

“While the emerging asset class has experienced outsized total returns and declining volatility over recent years, cryptocurrency could experience more elevated volatility and higher correlations with other asset classes in periods of macro and market stress.”

Translation: Although cryptocurrencies have shown significant returns and less volatility recently, they may face increased volatility and closer correlations with other assets during times of economic uncertainty.

Hunter Horsley, the CEO of Bitwise, described the report as “huge” news, noting that the GIC informs 16,000 advisors managing around $2 trillion for clients, marking a step into the mainstream for cryptocurrency investments.

Morgan Stanley’s findings underscore the increasing integration and acceptance of digital assets by major financial institutions, which is likely to draw more investment into the cryptocurrency markets and solidify its status as a legitimate asset class.

Morgan Stanley Report Recognizes Bitcoin as Digital Gold

Morgan Stanley analysts consider Bitcoin (BTC) as a ‘scarce asset, similar to digital gold,’ and it has begun to see institutional interest as a treasury reserve asset and through investment channels such as exchange-traded funds.

Recently, Bitcoin reached a record high of over $125,000, influenced by dwindling exchange balances and heightened demand amid market conditions.

Investment analysts at The Kobeissi Letter commented on the situation, highlighting:

“There is a widespread rush into assets happening right now. As inflation rebounds and the labor market weakens.”

Related Article: ETrade to add Bitcoin, Ether, Solana in Morgan Stanley’s crypto expansion