The recent participation of Morgan Stanley in the US spot bitcoin ETF market has sparked hopes of an end to the current crypto bear market, given the vast distribution network of the Wall Street wirehouse's $8 trillion wealth management division. However, Blockstream CEO Adam Back cautions that progress will be slower than anticipated. Despite the significance of bitcoin ETFs as a positive market signal, even surpassing the impact of a pro-crypto US administration, Back emphasizes that institutional adoption is a gradual process.
"I think what people may have miscalculated is that institutional adoption is very slow," he stated in an interview with Coindesk. The process of fund managers allocating 2% to 4% of their portfolios to bitcoin, as recommended by BlackRock, has not yet occurred and will take time. Investors do not make overnight decisions, and a build-up of investment could take up to a year or 18 months.
Back notes that some of these developments are just beginning to unfold and will progress slowly, creating a tailwind for the market. As the CEO and co-founder of Blockstream, a company offering self-custody wallets, layer-2 network settlement, and asset issuance, Back has a unique perspective on the industry.
He also heads 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, indirectly encouraging other countries to follow suit. The UK's FCA has approved ETFs for retirement accounts, and other countries may soon do the same. Back believes that the established bitcoin ETFs will transcend administrations, with BlackRock and other ETF providers defending their business interests.
Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event. Although some commentators think this cycle may be breaking, Back suggests that a price slide could still occur due to market expectations. The logic will only change when people see strength in the market, which is now coming in the form of institutional flows. Investors such as MicroStrategy are growing their ability to buy bitcoin in different market conditions, and recurring buyers, along with new institutional and wealth management buyers, will eventually overwhelm sellers.
Back also addressed concerns about quantum-computing hardware progressing faster than expected and its potential to break Bitcoin's cryptography. While he thinks there's information asymmetry in the market, institutions are more systematic about risk and may pay attention to the recent quantum doomsaying.
They will think ahead and assess potential risks, unlike retail investors who may not be as concerned about distant future risks.