Digital assets—including cryptocurrencies and stablecoins—are rapidly moving to the center of global capital markets. Once dismissed as speculative novelties, they have evolved into a multi-trillion‑dollar business, increasingly influencing how markets operate and how money moves.
Offering 24/7 trading, lower transaction costs, near‑instant settlement and enhanced transparency, digital assets are drawing increasing attention from investors, corporations and policymakers worldwide. Global market capitalization briefly exceeded $4 trillion, reflecting the accelerating pace of adoption.
As interest grows, regulators across the U.S., Europe and Asia are moving quickly to establish frameworks for oversight. Investment banks and other financial firms, including Morgan Stanley, are now offering clients exposure to digital assets in their portfolios. Many companies are already adapting their systems to accept or send payments in digital currencies.
“The digital asset trend has shifted from a focus solely on cryptocurrencies, like Bitcoin and Ethereum, to exploring the tokenization of all assets,” says Amy Oldenburg, Morgan Stanley Head of Digital Asset Strategy. “Our industry is now exploring how blockchain technology can deliver value in all areas of our business — while these themes have lead headlines, we are still in very early innings.”
Fast Adoption by Financial Firms
Momentum for the sector accelerated in 2024, when the U.S. Securities and Exchange Commission approved the first spot Bitcoin and Ethereum Exchange Traded Funds (ETFs). Since then, financial platforms, especially those serving institutional clients, have started integrating crypto. Pension funds, endowments and foundations have also begun making some small allocations to Bitcoin as a long-term inflation hedge.
Crypto ETFs briefly exceeded $200 billion of assets under management. Those funds received more than $40 billion in 2025 despite the volatility that marked last year.
“What's interesting with the crypto space is that adoption started on the retail side with institutions now slowly beginning to explore allocations,” says Michael Cyprys, Head of U.S. Brokers, Asset Managers and Exchanges for Morgan Stanley Research. “That's the opposite of what we've seen historically, with institutions traditionally leaning in ahead of retail, whether it's commodities or private markets.”
Bitcoin’s Unusual High Performance
Among digital assets, Bitcoin is still the most popular. Investors see it as a macro hedge against inflation and currency devaluation. Its total market value is now between $1 trillion and $2 trillion, or about half the size of the total digital assets market.
Many investors were attracted to Bitcoin because of its significant gains in the last ten years.
“Long-term performance shows an unusually high 10-year annualized return of 86% for Bitcoin—which is unlikely to be repeated over the next decade,” says Denny Galindo, Investment Strategist for Morgan Stanley Wealth Management. “To estimate Bitcoin’s long-term returns, we must consider long-term supply and demand—including penetration and adoption—but it’s hard to predict prices in the short term given its relatively brief history and high volatility.”
Stablecoins Get a Regulatory Boost
Stablecoins have also emerged as one of the fastest-growing digital assets. It is a form of cryptocurrency that’s pegged to a reference asset— primarily the U.S. dollar—to reduce volatility. They offer the same efficiency and programmability of blockchain technology: stablecoins are simple to use, can be processed quickly regardless of geographic location and have less perceived risk than cryptocurrencies.
In July, the U.S. Congress passed the Genius Act, a legislation that created a framework to govern how stablecoins are issued, used and reported. The European Union is advancing similar rules, and the retail digital euro could see the light of day by 2029, while the wholesale digital euro could go live earlier.
“After the approval of the Genius Act, many in the financial industry are working on their stablecoin strategy,” Galindo says.
Stablecoin reached a total market capitalization of $300 billion in September, a 75% increase from a year earlier. By some estimates, the market could exceed $2 trillion by 2028.
The Four Seasons of Crypto
Since Bitcoin was created in 2008, digital assets have followed pronounced four‑year price cycles—three years of gains followed by one year of decline. Analysts attribute this unique pattern to shifting interest rates, changes in global liquidity or supply dynamics similar to those seen in commodity markets.
“We don't know for sure which is the dominant factor, but we break the four-year cycle into four seasons: spring, summer, fall and winter,” Galindo says.
Bitcoin hit its all-time high on Oct. 6 and then it started a downward trend.
“Historically, crypto winters have lasted between 12 and 14 months, suggesting that if winter began in October, it could extend well into 2026,” Galindo says. “In terms of magnitude, prior cycles have seen peak-to-trough drawdowns of roughly 77% to 84%.”
What’s Next: Innovation and Market Expansion
The next wave of innovation will likely be around multi-asset token ETFs, expanded access through wealth platforms and potential inclusion of crypto ETFs in model portfolios.
Most recently, the SEC adopted generic ETF listing standards for crypto ETFs, which could accelerate launches and reduce regulatory frictions.
Exchanges and brokers are also seeing an opportunity in the acceleration of crypto trading. The Chicago Mercantile Exchange (CME) traded more than 340,000 contracts across its crypto complex in the third quarter of 2025, up more than 200% year-over-year and momentum continued into the fourth quarter of 2025 with over 370,000 contracts traded. The CME is now rolling out smaller size contracts that are more accessible, more expiration dates, more tokens, longer dated contracts and 24x7 trading of crypto derivatives, slated to go live this year.
Morgan Stanley’s Global Investment Committee expects cryptocurrency to deliver returns of around 6% over a seven-year horizon, but with significant risk to investors: Crypto’s annualized volatility is about 55%—which is approximately four times that of the S&P 500 Index.
Even small allocations to crypto can have an outsized impact on overall portfolio risk. For example, adding just a 6% position in crypto to a growth-oriented portfolio nearly doubled overall volatility, according to simulations by the Committee.
“We leave aside the most bullish projections—which call for the displacement of the U.S. dollar by crypto—and the most bearish—which assume that the technology fails, is banned or collapses in a tulip-mania-style bubble,” Oldenburg says. “It’s more important at this stage to encourage investors to educate themselves on this digitalization trend impacting the entire financial services industry.”
Bottom line: Digital assets are reshaping the global financial landscape. Adoption is accelerating, institutional views are shifting and regulators are providing clearer rules. While opportunities are expanding, risks remain substantial—and investors and companies will need disciplined strategies as the ecosystem evolves.
