The recent involvement of Morgan Stanley in the US spot bitcoin ETF market has been viewed 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, Blockstream CEO Adam Back has a more cautious outlook, stating that the process of institutional adoption is slower than most people realize. Back, an early contributor to the Bitcoin community, noted that while bitcoin ETFs are a significant development, it will take time for their impact to be felt.
"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 immediately pour in their funds, and the 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," he added.
Back also highlighted the importance of regulatory influences, citing the crypto-friendly stance of the current US presidency. The introduction of a new legislative framework for crypto and the launch of a token shop have created a more favorable environment for the industry.
"They've definitely improved the open-for-business framework in the US, which has indirectly encouraged other jurisdictions to do likewise," Back said. The establishment of bitcoin ETFs has the power to transcend administrations, with providers like BlackRock and Morgan Stanley likely to 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 noted that the reduction in token supply often leads to a bull run followed by a bear market. The current price slide could be driven by people's expectations, but this logic is likely to change as institutional flows increase.
"They are growing their ability to buy bitcoin in different market conditions," Back said, citing examples like MicroStrategy's bitcoin-backed income instrument. Finally, Back addressed concerns about quantum computing's potential to break Bitcoin's cryptography, stating that while institutions may be paying attention to the risk, it is not a immediate concern.