While many financial institutions are skeptical of cryptocurrencies, Morgan Stanley, the world’s fourth-largest investment bank by revenue, is taking a different path.
In a research note today, Morgan Stanley offered stock in Silvergate, which provides commercial banking and lending services to crypto firms. Morgan Stanley analyst Ken Zerbe thinks SI stock’s current trading price of $109 is severely undervalued. By his calculation, $158 would be more accurate – he acknowledges that while there is potential for $300, there is a risk of a drop as low as $40.
In the last 24 hours, the price of SI stock has increased by 6.5%.
While the analyst noted that the risks to cryptocurrency markets, such as regulation and price volatility, outweigh the boom in demand for crypto services, he notes that the company offers bank investors a way to participate in the rapid growth of the cryptocurrency industry.
Silvergate also continues to benefit from Facebook’s relationship with the Diem project. In May, the Diem Association announced that Silvergate would be the sole issuer of its stablecoins. Morgan Stanley has headed the SI ever since. Back in March, MicroStrategy shared its cryptocurrency risk basket, which includes Silvergate stake along with Square, Riot Blockchain, and Nvidia (but not Tesla). All of this causes Morgan Stanley to give investors a “raise the weight” recommendation for the stock. As Morgan Stanley puts it, “Silvergate is different from the other banks we cover, and that could very well be a good thing.”
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.