The recent entry of Morgan Stanley into the US spot bitcoin ETF market has been hailed by some as a catalyst to end the current crypto bear market, thanks to the vast distribution power of the Wall Street wirehouse's $8 trillion advisory network. However, Blockstream CEO Adam Back has urged caution, stating that the process of institutional adoption will be slower than anticipated. Back, an early contributor to the Bitcoin community, noted that while bitcoin ETFs are a significant development, it takes time for institutional investors to allocate funds. He cited the example of BlackRock recommending a 2-4% allocation to bitcoin in their general stock portfolio, but fund managers have yet to act on this recommendation.
According to Back, this build-up could take up to a year or 18 months, and investors do not pile in overnight. Despite the slow pace, Back believes there is a positive tailwind for the market. Founded in 2014, Blockstream offers self-custody wallets, layer-2 network settlement, and asset issuance to retail and institutional clients. Back is also the CEO and co-founder of BSTR, a bitcoin treasury company.
The Trump administration's crypto-friendly stance has also contributed to a more favorable regulatory environment. The introduction of a new legislative framework for crypto and the launch of a token shop have indirectly encouraged other jurisdictions to follow suit.
Back pointed out that the establishment of bitcoin ETFs has the power to transcend administrations, and companies like BlackRock and Morgan Stanley will defend their business interests in the bitcoin market. Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event. While some commentators believe the four-year cycle is breaking, Back noted that the reduction in supply often leads to a bull run followed by a bear market.
The recent price slide can be attributed to people's expectations, but this logic will change when people see strength in the market, driven by institutional flows and investors buying bitcoin directly or shares in bitcoin treasury companies. Back also addressed concerns about quantum computing's potential to break Bitcoin's cryptography, stating that institutions are more systematic about risk and will consider even small tail risks.
While quantum technology may not be an immediate concern, institutions will think ahead and seek answers to potential risks.