The recent entry of Morgan Stanley into the US spot bitcoin ETF market has been seen by some as a turning point in the current crypto bear market, thanks to the vast distribution capabilities of the Wall Street firm's $8 trillion wealth management network. However, Blockstream CEO Adam Back cautions that this process will take longer than anticipated. According to Back, the introduction of bitcoin ETFs is a significant development, but institutional adoption is a slow process.
"I think what people may have miscalculated is that institutional adoption is very slow," he said in an interview. "So the ETFs got bought, but when BlackRock is saying they recommend 2% to 4% allocation in their general stock portfolio, the fund managers haven't done that yet. And they will, but it's slower than people anticipate." Back notes that investors do not invest overnight and that a build-up could take a year or even 18 months.
He believes there is a tailwind, but it will happen slowly. The company he co-founded, 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 aiming to go public via a SPAC merger.
The current US presidency has introduced a new legislative framework for crypto and launched its own token shop, which has indirectly encouraged other jurisdictions to follow suit. Back points out that the established bitcoin ETFs have the power to transcend administrations, whether Republican or Democrat.
He believes that now BlackRock and other ETF providers will defend their business and apply a banking lobby to prevent interference. Another factor to consider is bitcoin's cyclical nature, driven by the quadrennial halving event, which cuts the supply of new tokens by 50%.
Even if this cycle is breaking, there is still a possibility of a price slide due to market expectations. However, this logic will change when people see strength in the market, which is now coming in the form of institutional flows. Back also addresses concerns about quantum-computing hardware progressing faster than expected and its potential to break Bitcoin's cryptography.
He believes that institutions are more systematic about risk and will consider even small tail risks, such as the potential impact of quantum technology on bitcoin's price.