MORGAN STANLEY: Investors pumped $2 billion into crypto funds this year — and 2018 will be bigger

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An electric board showing exchange rate between South Korean Won and Bitcoin at a cryptocurrencies exchange in Seoul, South Korea December 13, 2017. REUTERS/Kim Hong-Ji

• MS: Over 100 crypto funds with an estimated $2 billion in assets under management, 2018 "will likely be bigger."
• New index tracking returns of cryptocurrency-focused hedge funds shows returns of 1,641% in the year through to November.

LONDON — An estimated $2 billion has been invested with specialist hedge funds focusing on cryptocurrencies in 2017, according to estimates from Morgan Stanley.

The investment bank made the estimate based on data from consultancy Autonomous NEXT and Morgan Stanley's own research. It came in a note titled "Bitcoin Decoded" sent to clients this week.Morgan Stanley

Bitcoin has rocketed over 1,500% against the dollar in 2017, spurring huge amounts of interest from both institutional and retail investors. A list sent by HedgeFundAlert.com in mid-November details over 120 cryptocurrency-specific hedge funds.

Hedge fund industry data provider HFR last week launched two new indices, the HFR Blockchain Composite Index and the HFR Cryptocurrency Index, meant to track investment in the space. The two indices track only around 20 products but have data stretching back to 2015. The Cryptocurrency Index has annualized performance of 292% since inception and has surged 1,641% in 2017 through to November.

Kenneth J. Heinz, President of HFR, said in a release announcing the new products: "Investor interest in funds offering exposure to Blockchain technologies and Cryptocurrencies has surged in recent months as these innovations continue to move towards the mainstream and generate compelling opportunities for investors, portfolio managers, traders and other market participants."

But he cautions that the area is "involves substantial volatility and risks, both real and structural."

Earlier this month, exchange operators Cboe and CME Group launched bitcoin futures contracts, which give more traditional institutional investors access to what JPMorgan has called an "emerging asset class." Trade on both exchanges has been relatively thin so far.

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Corporate borrowing drives global debt issuance to a record $6.8 trillion in 2017

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London, City, Canary Wharf Russell Boyce, Reuters

• Corporate borrowing made up 55% of global debt issuance in 2017.
• A decade of low interest rates caused investors to look to emerging markets and company bonds for returns.

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LONDON — Corporate borrowing helped push global debt issuance to a record $6.8 trillion this year, according to data by Dealogic.

Borrowing by corporates — which accounted for more than 55% of the $6.8 trillion — and governments reached a new high in 2017 via syndicated bond sales, generating huge fees for the banks underwriting the sales. The figure relates to mortgage- and asset- backed securities, but does not cover sovereign debt sold at auction.

"The debt issuance is pretty much off the charts everywhere," AJ Murphey, head of capital markets at Bank of America Merrill Lynch told the Financial Times. "Latin America had a good year. Asia had a great year. And yet we see money coming from other regions into the US and European markets," he said.

Persistently low interest rates in developed economies for almost a decade has driven investors to look to emerging market governments and company bonds for returns.

The new record for syndicated sales also meant investment banks generated fees of highs not seen since the 2008 financial crisis. Banks earned $30 billion in bond fees this year, the highest level since records began in 2000, according to Thomson Reuters data.

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House passes tax bill and nears huge win for Trump, GOP

December 19, 2017

The House passed the Tax Cuts and Jobs Act on Tuesday by a vote of 227 to 203. The bill would provide the biggest overhaul for the US tax code in a generation. The TCJA will next head to the Senate for a vote later on Tuesday. The House passed the massive GOP tax bill on Tuesday, putting Republicans on the precipice of their biggest legislative victory of President Donald Trump's presidency and a once-in-a-generation overhaul of the federal tax code. The bill, the Tax Cuts and Jobs Act (TCJA), passed by a vote of 227 to 203. It now heads to the Senate, where Majority Leader Mitch McConnell expects a vote later Tuesday. President Donald Trump could sign it as soon as Wednesday. House Speaker Paul Ryan, who has fought to rewrite the tax code for much of his nearly two decades in office, announced the legislation's passage on the House floor, triumphantly banging his gavel announcing the vote totals. Twelve House Republicans voted against the bill, largely because of its tweak to the state and local tax deduction. GOP lawmakers from states with higher taxes, such as California and New York, did not believe a compromise to allow resident to deduct up to $10,000 in state and local taxes was a fair solution for their constituents. The TCJA would overhaul the tax system for both businesses and individuals. The federal corporate tax rate would be cut to 21% from the current 35%. It also would repeal Obamacare's individual mandate that requires most people to have insurance, and brings down taxes on individuals until 2026. Republicans have argued the bill, if law, would help boost the economy and help middle-class families. Democrats and critics argue that the bill will favor the rich and corporations, while doing little to nothing to help the middle class. According to nonpartisan analyses, every income level would see an immediate tax cut, but the gains would eventually tilt towards wealthier Americans. The bill is projected to add roughly $1 trillion in new debt over the next 10 years, according to research, despite the GOP's insistence that the legislation would pay for itself. Republicans immediately cheered the passage of the bill, with House Ways and Mean Chair Kevin Brady — an author of the bill — saying it would be beneficial for all Americans. "Today, the House took action on once-in-a-generation legislation that will dramatically improve the lives of hardworking people in Texas and across the country," Bready said in a statement. Democrats, on the other hand, blasted the bill including House Speaker Nancy Pelosi. "There are few things more disturbing than hearing the swell of cheers from the @HouseGOP as they raise taxes on 86 million middle class families. #GOPTaxScam," Pelosi tweeted after the vote. The bill's passage comes after a blitz from Republicans to get it through Congress in a matter of weeks. The original House version of the TCJA was introduced just under seven weeks ago, and the process has moved at lightning speed. SEE ALSO: A key report shows the final GOP tax bill boosting the US economy — but by well less than Republicans promised

Bitcoin falls after CME Group launches bitcoin futures

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A man walks past an electric board showing exchange rates of various cryptocurrencies including Bitcoin (top L) at a cryptocurrencies exchange in Seoul Thomson Reuters

• CME Groups' market for bitcoin futures launched Sunday night in Chicago.
• The underlying value of bitcoin dipped slightly.
• Early volumes were similar to those seen on Cboe Global Markets last week.

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Bitcoin futures launched Sunday night on the Chicago-based CME Group's exchange venue.

Early volumes were light, and just before publication 354 contracts had changed hands on the most actively traded one-month forward contract.

The value of the forward contracts fell as low as $18,775, down $725 from the opening value of $19,500.

Just before publication, one-month contracts expiring in January 2018 were trading at $19,005.

CME Group is the largest futures exchange in the world. Its new market for bitcoin futures is expected to add more liquidity to the market after last Sunday's launch of future’s trading on Cboe.

“This market should see way bigger volumes. CME is a way bigger player in futures than Cboe,” John Spallanzani, chief macro strategist at CFI Group, told Business Insider.

Once CME futures trading commenced, the value of spot bitcoin on the composite index provided by cryptocurrency watcher CoinDesk was initially little-changed at a value of around $19,260.

Since then, prices have declined, and at last check bitcoin was trading at $18,230.92.

Garrett See, the CEO of cryptocurrency trading firm DV Chain, told Business Insider that early volumes were similar to those seen on the Cboe exchange last week.

“The order book is thin. The CME futures are trading at a premium to Cboe futures, but the premium has come in a bit since the open,” See said.

The CME exchange may see higher volume overnight as markets open on Monday morning in the US.

MI

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