The recent participation of Morgan Stanley in the US spot bitcoin ETF market has been viewed by some as a pivotal moment that could potentially bring an end to the current cryptocurrency bear market, given the vast distribution capabilities of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back cautions that this process is not as rapid as many might assume. Back, an early contributor to the Bitcoin community and recently speculated to be the pseudonymous creator of bitcoin, Satoshi Nakamoto, emphasizes that the impact of institutional adoption is often underestimated in terms of its timeline.
"I think what people may have miscalculated is that institutional adoption is very slow," Back stated in an interview. "So, the ETFs got bought, but when BlackRock recommends a 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, the build-up of institutional investment can take up to a year or even 18 months, indicating a gradual rather than immediate effect on the market.
Back also points out that the regulatory environment, particularly in the US, has seen significant improvements under the current presidency, with the introduction of a new legislative framework for crypto and the launch of a token shop. This shift has indirectly encouraged other jurisdictions to follow suit, with the UK's Financial Conduct Authority (FCA) approving ETFs for retirement accounts. The establishment of bitcoin ETFs, Back suggests, has the power to transcend political administrations, with major financial institutions like BlackRock and Morgan Stanley likely to defend their interests in the bitcoin market. Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event.
While some believe this cycle may be breaking, Back notes that the expectation of a price slide can become a self-fulfilling prophecy. However, with the influx of institutional flows, such as ETFs and sovereign wealth fund investments, and the growing ability of investors to buy bitcoin in different market conditions, Back believes that these buyers will eventually overwhelm the sellers. Addressing concerns about quantum computing's potential to break Bitcoin's cryptography, Back acknowledges that institutions are more systematic about risk and may pay attention to such tail risks, even if they seem distant or small.
Overall, while the arrival of institutional money in the bitcoin market is a positive development, its impact will be felt gradually, and other factors such as regulatory environments and the cyclical nature of bitcoin will continue to influence the market.