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, according to Blockstream CEO Adam Back, an early contributor to the Bitcoin community, the impact of institutional investment will take longer to materialize than most people anticipate.
Back, who has been tipped as the possible creator of Bitcoin, Satoshi Nakamoto, emphasized that the process of institutional adoption is slow and that the buying of ETFs is just the beginning. He pointed out that even when large institutions like BlackRock recommend a 2% to 4% allocation of bitcoin in their portfolios, the actual implementation by fund managers takes time. This gradual process, which could take up to a year or 18 months, contributes to a slow but steady build-up of investment in bitcoin.
Back also noted that regulatory influences, such as the pro-crypto stance of the current US administration, play a significant role in boosting the industry. The introduction of new legislative frameworks for crypto and the launch of token shops have indirectly encouraged other jurisdictions to follow suit, creating a more favorable environment for crypto businesses. Furthermore, the establishment of bitcoin ETFs has the potential to transcend political administrations, with major financial institutions like BlackRock and Morgan Stanley likely to defend their bitcoin-related businesses.
Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event that reduces the supply of new tokens. While some commentators believe this cycle may be breaking, Back suggested that the possibility of a price slide remains due to market expectations. However, with the influx of institutional flows and the growth of companies like MicroStrategy, which is increasing its ability to buy bitcoin in various market conditions, the market is likely to see strength and eventually overwhelm sellers. Additionally, Back addressed concerns about quantum computing's potential to break Bitcoin's cryptography, stating that while institutions may pay attention to such risks, the impact on the price of bitcoin is likely to be minimal due to information asymmetry in the markets.