Morgan Stanley (NYSE:MS) has noted that the recent closures of traditional banks in the U.S. create a perfect opportunity for Bitcoin (CRYPTO: BTC) to shine as holders of the largest cryptocurrency in private wallets would be protected from counterparty risk.

In a research report published on Monday, the investment bank stated that Bitcoin was designed as a way for people to hold value in a private digital wallet without intermediaries.

"Crypto prices rose quickly in 2020/21 due to central bank monetary expansion, causing capital to move from the traditional fiat banking world to the crypto world," according to Coindesk analysts.

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However, the report further noted that Bitcoin's price and purchasing power continues to be influenced by central bank policy and need banks to facilitate flows into the cryptocurrency market.

Per Morgan Stanley, Bitcoin's reaction to negative news changed in recent days, rising almost 20% on Monday after the Federal Reserve and the Treasury announced their support for the banking sector.

Nonetheless, last week, Bitcoin, along with risk assets and bank stocks, fell as a speculative asset.

The note added that if Bitcoin were trading on its core value proposition, it would have rallied with rising bank uncertainty. The recent rally in Bitcoin's price was driven by a small number of market participants and was likely helped by a short squeeze, rather than a fundamental shift in the trading dynamic.

"Shorting is a way of betting that the price of an asset will decline. A short squeeze occurs when an asset gains in price, and investors positioned short are forced to cover their positions for a loss," the report explained.

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