MORGAN STANLEY: Bitcoin isn't a currency

Bitcoin may have appreciated 300% in the last 12 months, but Morgan Stanley still isn't convinced the cryptocurrency will be a viable currency in the long run.

In new research published this week, analysts at the bank say that bitcoin (and its counterparts like ethereum) are still more like investment vehicles than fiat currency that you could spend on goods and services. In addition, it said there are few reasons to use bitcoin instead of a debit or credit card, as it represents a "marginally more inconvenient way to pay."

Here's Morgan Stanley:

Most regulators and investors view cryptocurrencies more as assets than actual currencies. Their values are too volatile and too hard to actually use for payment for most to consider them currencies. Our conversations with some merchants indicate that, while cryptocurrencies might actually be attractive for them to operate their businesses, they find that the cryptocurrencies are far too volatile to be used.

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The price of bitcoin has exploded in the past year.

The huge rise in the price of bitcoin is perplexing to the bank, which says other factors should have brought bitcoin's value down. These include the SEC's rejection of a bitcoin ETF proposed by the Winklevoss twins, declining trading volumes, and a Chinese crackdown on bitcoin miners, without which the processing time for transactions would substantially increase.

"It is not clear why cryptocurrencies are appreciating so rapidly (apart from the appreciation itself drawing in more speculation against a potentially inefficent ability to sell)," the bank said in a note.

Still, Morgan Stanley has some guesses as to why bitcoin has seen such a catastrophic rise:

1. ICO's, or Initial Coin Offerings: Instead of traditional public offerings or funding rounds, a handful of companies have begun offering investors digital tokens in exchange for cash. In on high-profile case, a tech startup called Aragon raised $12.5 million in less than 15 minutes in its ICO.
2. China: There are strict limits on currency outflows in the country, and Morgan Stanley assumes many people are using cryptocurrencies as a way to bypass the limits.
3. Korea and Japan: Bitcoin was just legalized by the Japanese government, so it makes sense that it would be gaining popularity in the contry. "In Korea, however, there is not a clear explanation for the surge," the bank writes.

Get the latest Bitcoin price here.