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 mark the end of 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 will take longer than expected. Back, an early contributor to the Bitcoin community and rumored to be the pseudonymous creator of Bitcoin, Satoshi Nakamoto, emphasizes that the impact of institutional adoption is often underestimated in terms of its speed. In an interview with Coindesk, Back noted that while the introduction of bitcoin ETFs is a significant positive market signal, possibly even more so than a pro-crypto US administration, the effects will not be immediate.
He highlights that institutional investors, such as those at BlackRock who recommend a 2% to 4% allocation of bitcoin in their portfolios, take time to adjust their strategies. This build-up of investment can take up to a year or even 18 months to materialize, according to Back.
Despite the gradual pace, Back sees a 'tailwind' in the market due to these developments. Blockstream, which Back co-founded in 2014, offers services including self-custody wallets and asset issuance to both retail and institutional clients. Additionally, Back is involved with BSTR, a bitcoin treasury company aiming to go public through a SPAC merger. The regulatory environment has also seen shifts, with the current US presidency introducing a more crypto-friendly framework.
This has encouraged other jurisdictions to follow suit, such as the UK's Financial Conduct Authority approving ETFs for retirement accounts. Back believes that the establishment of bitcoin ETFs provides a level of stability that transcends political administrations, as major financial institutions like BlackRock and Morgan Stanley will defend their interests in the bitcoin market.
Another factor influencing bitcoin's price is its cyclical nature, driven by the halving event that occurs every four years. While some believe this cycle may be breaking, Back suggests that the expectation of a price slide can become a self-fulfilling prophecy.
The entry of institutional investors, including those investing in bitcoin directly or through companies like MicroStrategy, is expected to eventually outweigh sellers. Back also addresses 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 often exaggerated due to information asymmetry. Overall, Back's insights provide a nuanced view of the evolving landscape of bitcoin investment, highlighting both the potential for growth and the complexities of institutional adoption.