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 has urged caution, stating that institutional adoption is a slow process. Back, an early contributor to the Bitcoin community and rumored to be the pseudonymous creator of Bitcoin, Satoshi Nakamoto, emphasized that the impact of bitcoin ETFs will be significant but not immediate. In an interview with Coindesk, Back noted that while BlackRock recommends a 2% to 4% allocation of bitcoin in general stock portfolios, fund managers have yet to act on this advice.
He predicted that a build-up of investment could take up to a year or 18 months. Back also pointed out that the regulatory environment, particularly in the US, has improved under the current presidency, with the introduction of a new legislative framework for crypto and the launch of a token shop. This shift has encouraged other jurisdictions to follow suit, such as the UK's FCA approving ETFs for retirement accounts.
The establishment of bitcoin ETFs, Back argued, has the power to transcend administrations and will be defended by major financial institutions such as BlackRock and Morgan Stanley. Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event. While some commentators believe this cycle may be broken, Back suggested that the possibility of a price slide remains due to market expectations. However, he noted that institutional flows, such as ETFs and sovereign investments, are now providing strength to the market.
The growth of companies like MicroStrategy, which has been buying bitcoin through its fixed-income product, will eventually overwhelm sellers, Back said. Additionally, Back addressed concerns about quantum computing's potential impact on Bitcoin's cryptography, stating that while institutions may be paying attention to this risk, it is not a immediate concern. He emphasized that institutions are systematic about risk and will consider even small tail risks, but retail investors may not be as concerned about this issue.