The recent participation of Morgan Stanley in the US spot bitcoin ETF market has been viewed by some as a catalyst that could mark the end of the current cryptocurrency bear market, given the vast distribution capabilities of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back, an early contributor to the Bitcoin community and recently speculated to be the pseudonymous creator of the cryptocurrency, Satoshi Nakamoto, which he denies, suggests that the process will take longer than anticipated. In an interview with Coindesk, Back emphasized that the introduction of bitcoin ETFs is a significant development, potentially more impactful than a pro-crypto US administration, but institutional adoption is a slow process. "I think what people may have miscalculated is that institutional adoption is very slow," Back stated, explaining that even when major financial institutions like BlackRock recommend allocating 2% to 4% of their portfolios to bitcoin, the actual implementation by fund managers is not immediate and can take up to a year or more.
Back also pointed out that investors do not make overnight decisions, and the build-up of investments can be gradual. He believes that despite the slow pace, there is a positive trend emerging.
As the CEO of Blockstream, a company that offers self-custody wallets, layer-2 network settlement, and asset issuance to both retail and institutional clients, Back has a unique perspective on the market. Additionally, as the CEO and co-founder of BSTR, a bitcoin treasury company, Back is closely involved in the financial aspects of the cryptocurrency industry.
The influence of regulatory environments, such as the crypto-friendly stance of the current US presidency, which has introduced a new legislative framework for crypto and even launched its own token shop, cannot be overlooked. Back noted that this openness to cryptocurrency has encouraged other jurisdictions to follow suit, citing the UK's Financial Conduct Authority (FCA) approval of ETFs for retirement accounts as an example. The establishment of bitcoin ETFs, Back argued, has the potential to transcend political administrations, with major financial institutions like BlackRock and Morgan Stanley likely to defend their bitcoin-related businesses. Another factor affecting bitcoin's price is its cyclical nature, driven by the quadrennial halving event, which reduces the supply of new tokens and often leads to a bull run followed by a bear market.
While some believe this cycle may be breaking, Back suggested that the anticipation of a price slide can become a self-fulfilling prophecy. However, with the influx of institutional investments, such as those from ETFs, sovereign wealth funds, and direct purchases of bitcoin or shares in bitcoin treasury companies, the market is likely to see strength that could change this logic.
Back also addressed concerns about quantum computing's potential to break Bitcoin's cryptography, stating that while institutions may pay attention to such risks, the impact on the price of bitcoin is often due to information asymmetry and confusion among investors. Institutions, being more systematic about risk, will consider even small tail risks and seek answers, which could include the potential impact of quantum technology on bitcoin's security.