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 crypto bear market, given the vast distribution power of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back cautions that the process is slower than many people think. Back, an early contributor to the Bitcoin community, believes that while bitcoin ETFs are a crucial development for positive market signals, their impact will not be immediate.
"I think what people may have miscalculated is that institutional adoption is very slow," Back explained 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." According to Back, investors do not invest overnight, and the build-up of institutional investment could take up to a year or 18 months. He notes that some of this investment is just beginning to happen and will occur slowly, creating a tailwind for the market.
Back also discussed the impact of regulatory changes, particularly in the US, where the current presidency has introduced a new legislative framework for crypto and launched its own token shop. This has encouraged other jurisdictions to follow suit, such as the UK's FCA approving ETFs for retirement accounts. The establishment of bitcoin ETFs has the power to transcend administrations, with companies like BlackRock and Morgan Stanley likely to defend 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. Back also addressed concerns about quantum computing's potential to break Bitcoin's cryptography, stating that while it may be a factor, institutions are more systematic about risk and will consider even small tail risks. Overall, Back believes that institutional flows, such as ETFs and sovereign wealth fund investments, will eventually overwhelm sellers and drive the market forward.