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, thanks to the vast distribution power of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back cautions that this process will take longer than expected. Back, an early contributor to the Bitcoin community and rumored to be the pseudonymous creator of Bitcoin, Satoshi Nakamoto, believes that while bitcoin ETFs are a crucial development, institutional adoption is slower than anticipated. "I think what people may have miscalculated is that institutional adoption is very slow," Back 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." According to Back, investors do not invest overnight, and a build-up of investment could take up to a year or 18 months. Back also notes that the regulatory environment, particularly in the US, has improved under the current administration, which has introduced a new legislative framework for crypto and launched its own token shop. The establishment of bitcoin ETFs, however, has the power to transcend administrations and will likely be defended by major financial institutions such as BlackRock and Morgan Stanley.
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 addresses 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.