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 Wall Street wirehouse's $8 trillion wealth management network. However, Blockstream CEO Adam Back cautions that this process will take longer than anticipated. Back, an early contributor to the Bitcoin community and rumored to be the pseudonymous creator of bitcoin, Satoshi Nakamoto, believes that while bitcoin ETFs are a significant development, institutional adoption is a slow 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 invest overnight, and a build-up of investments 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." Back also notes that the regulatory environment has improved under the current US presidency, which has introduced a new legislative framework for crypto and launched its own token shop. This has encouraged other jurisdictions to follow suit, such as the UK's FCA approving ETFs for retirement accounts. The established bitcoin ETFs have the power to transcend administrations, with providers like BlackRock and Morgan Stanley defending their business interests. Another factor to consider is bitcoin's cyclical nature, driven by the quadrennial halving event, which often leads to a bull run followed by a bear market.
While some commentators believe this cycle may be breaking, Back notes that the possibility of a price slide remains due to market expectations. However, institutional flows, such as ETFs and sovereign wealth fund investments, are changing this logic, and buyers are growing their ability to purchase bitcoin in different market conditions. Back also addressed concerns about quantum computing's potential to break Bitcoin's cryptography, stating that while institutions may be paying attention to this risk, it is not a significant factor in the current market.
Overall, Back believes that the influx of institutional investment in bitcoin will eventually overwhelm sellers, driven by the growing demand from wealth management buyers and the improving regulatory environment.