The recent participation of Morgan Stanley in the US spot bitcoin ETF market has been viewed by some as a catalyst for ending the current crypto bear market, given the vast distribution network of the Wall Street wirehouse's $8 trillion advisory business. However, Blockstream CEO Adam Back cautions that the process is slower than anticipated. The introduction of bitcoin ETFs is a significant development, potentially more impactful than a pro-crypto US administration, but its effects will not be immediate, Back noted in an interview with Coindesk. He emphasized that institutional adoption is a gradual process, and fund managers have not yet allocated the recommended 2-4% of their portfolios to bitcoin, despite BlackRock's suggestion.
This reallocation will occur, but at a slower pace than expected, potentially taking up to a year or 18 months. Back attributes the delay to the time it takes for investors to adjust their portfolios, but he believes that the growing involvement of institutional investors will eventually lead to a positive market trend. The regulatory environment also plays a crucial role, with the current US presidency introducing a new legislative framework for crypto and launching its own token shop, indirectly encouraging other countries to follow suit.
The establishment of bitcoin ETFs, backed by major financial institutions such as BlackRock and Morgan Stanley, is expected to have a lasting impact, transcending political administrations. Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event, which reduces the supply of new tokens by 50%.
While some commentators believe this cycle may be breaking, Back suggests that the price may still be affected by expectations of a slide, which can become a self-fulfilling prophecy. However, he notes that institutional flows, such as ETFs and sovereign wealth fund investments, are likely to change this dynamic, as investors like MicroStrategy continue to buy bitcoin and develop new investment products. Additionally, Back addresses concerns about quantum computing's potential to break Bitcoin's cryptography, stating that while institutions may be paying attention to this risk, it is not a significant factor in the current market.
Overall, Back's assessment is that the influx of institutional investment in bitcoin will be a gradual process, but one that will ultimately have a positive impact on the market.