The recent entry of Morgan Stanley into the US spot bitcoin ETF market has been seen by some as a catalyst to end the current cryptocurrency bear market, given the vast distribution power of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back has a more cautious outlook, stating that institutional adoption is a slow process. Back, an early contributor to the Bitcoin community, believes that while bitcoin ETFs are a crucial development, their impact will not be immediate. In an interview with Coindesk, Back noted that investors do not make decisions overnight and that a build-up of investment could take up to a year or 18 months.
He also pointed out that fund managers have not yet allocated the recommended 2-4% of their portfolios to bitcoin, despite BlackRock's suggestion to do so. Back's company, Blockstream, offers self-custody wallets, layer-2 network settlement, and asset issuance to retail and institutional clients. The company's CEO also co-founded BSTR, a bitcoin treasury company aiming to go public via a SPAC merger.
The regulatory environment has also seen improvements, with the current US presidency introducing a new legislative framework for crypto and launching its own token shop. This has encouraged other jurisdictions to follow suit, with the UK's FCA approving ETFs for retirement accounts. Back believes that the established bitcoin ETFs have the power to transcend administrations, with companies like BlackRock and Morgan Stanley defending their business interests. Another factor to consider is bitcoin's cyclical nature, driven by the quadrennial halving event, which often leads to a bull run followed by a bear market.
While some commentators believe this cycle may be breaking, Back thinks that the price slide could still occur due to market expectations. However, with institutional flows and investors buying bitcoin directly or shares in bitcoin treasury companies, the market is likely to see strength.
Quantum computing has also been a topic of discussion, with some claiming it could break Bitcoin's cryptography. Back believes that while institutions may be paying attention to this risk, it is not a significant concern at present. Overall, Back's outlook is that institutional investment in bitcoin will be a gradual process, with a tailwind of positive market signals and growing adoption.