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 cryptocurrency bear market, given 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, believes that while bitcoin ETFs are a significant development, institutional adoption is slower than anticipated.
'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.' According to Back, investors do not immediately invest, and a build-up could take up to a year or 18 months. 'Some of that stuff is just starting to happen, and it will happen slowly.
So I think there's a tailwind.' Blockstream, founded in 2014 by Back and other prominent Bitcoin developers, offers self-custody wallets, layer-2 network settlement, and asset issuance to retail and institutional clients. The company's CEO also co-founded BSTR, a bitcoin treasury company looking 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 jurisdictions to follow suit. 'They've definitely improved the open-for-business framework in the US, which has indirectly encouraged other jurisdictions to do likewise,' said Back.
The establishment of bitcoin ETFs has the power to transcend administrations, with providers like BlackRock and Morgan Stanley likely to defend their business interests. 'One of the reasons to suppose the 'open for business' is going to stay, even as you get new administrations, is that now Black Rock and the other ETF providers are going to defend their business,' Back pointed out.
Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event. Even if this cycle is breaking, a price slide could still occur due to market expectations.
However, institutional flows, such as ETFs and sovereign investments, are likely to eventually overwhelm sellers. Back also addressed concerns about quantum computing's potential impact on Bitcoin's cryptography, stating that institutions are more systematic about risk and may pay attention to potential tail risks.
'Institutions are more systematic about risk,' he said. 'So if there's a tail risk, even a small one, they want to know that it's covered.'