The recent participation of Morgan Stanley in the US spot bitcoin ETF market has been seen by some as a catalyst to end the current crypto bear market, given the enormous distribution power of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back cautions that this process will be slower than anticipated.
Back, an early contributor to the Bitcoin community, believes that while bitcoin ETFs are a crucial development for positive market signals, institutional adoption is a gradual process. "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 make instantaneous decisions, and a build-up of investment 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," he added. Back is also the CEO and co-founder of 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, which has indirectly encouraged 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 Black Rock and Morgan Stanley defending their business interests. Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event. Even if this cycle is breaking, there is still a possibility of a price slide due to market expectations.
However, institutional flows, such as ETFs and sovereign investments, are changing the market dynamics. "They are growing their ability to buy bitcoin in different market conditions," Back said. "MicroStrategy, particularly, has been having an accelerated success with their Stretch kind of fixed-income product.
So they've been able to use that to buy a lot of bitcoin, and it's escalated even in the last few weeks. So those recurring buyers plus new institutional and wealth management buyers will eventually overwhelm the sellers." Back also addressed concerns about quantum-computing hardware and its potential impact on Bitcoin's cryptography. While he believes that quantum technology is not an immediate threat, institutions are paying attention to the potential 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."