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, thanks to the vast distribution power of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back cautions that the process is slower than anticipated. According to Back, the introduction of bitcoin ETFs is a significant development, but institutional adoption takes time. "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." Back notes that investors do not immediately invest, and a build-up could take up to a year or 18 months.
The regulatory environment has also improved, with the current US presidency introducing a new legislative framework for crypto and launching its own token shop. This has encouraged other jurisdictions to follow suit.
Back believes that the established bitcoin ETFs have the power to transcend administrations and that companies like BlackRock will defend their business interests. Another factor to consider is bitcoin's cyclical nature, driven by the quadrennial halving event.
While some commentators believe the four-year cycle is breaking, Back suggests that the logic of the cycle will only change when people see strength in the market. This strength is now coming in the form of institutional flows, such as ETFs, sovereign, and sovereign wealth fund investments. Quantum computing is also a factor, with some claiming it could break Bitcoin's cryptography. However, Back believes that the impact of quantum technology on the price of bitcoin is overstated and that institutions are more systematic about risk, considering even small tail risks.