Last week, it was announced that investment bank Morgan Stanley would be purchasing the trading firm E*Trade Financial Group. This $13 billion deal represents a major move in the financial space and will have ripple effects on the trading industry.
This is relevant to the crypto world because E*Trade and Morgan Stanley have both made moves in the last few years to do work in the crypto space. Now, with E*Trade’s $360 billion in assets, Morgan Stanley is also gaining access to a whole new customer base that consists of at least 4,000 corporate customers.
Last year, E*Trade indicated their intentions to offer Bitcoin and Ethereum, making it the first major brokerage to attempt this. Robin Hood currently offers Litecoin and Bitcoin Cash, but E*Trade was making a bid to expand their customer base and product offering.
A Second Attempt
Morgan Stanley did try to get into the cryptocurrency space themselves, but their futures offerings did not catch on. So after postponing plans for a while, this seems like a great way to enter.
The investment bank has another important connection to the crypto world in the fact that 8 former Morgan Stanley executives just started Phemex. As a derivatives trading platform operating out of Singapore, they believe that they can offer more leverage and faster trading than any of their current competitors.
This is a common theme in the crypto world right now where it is attracting more institutional interest and moving away from being the Wild West. Although not even close to fully gentrified, when we see these sort of career shifts from traditional finance to a more entrepreneurial bent, it signals the next phase in the development of the industry.
A Different Expansion Method
There are generally only a few ways for the market to get infiltrated. One of these is for a new company to be built from scratch in the space, and have it slowly accumulate users and grow in size. However, for companies like Morgan Stanley who have the cash, they can perform a more riskless version of this.
Instead of putting in lots of time to grow a department or user base, they can just make an acquisition, like they’re doing right now. CEO Michael Pizzi will remain in his position, and all the branding and campaigns will say the same. This indicates that Morgan Stanley is looking for more synergies than to fully integrate or modify the E*Trade business.
There have been no takeovers of this size since the financial crisis of 2008, which could mean this is the last step before collapse occurs all over again. High-priced acquisitions are a common indicator of the “booms” or peaks that are usually followed by crashes.