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 company's $8 trillion wealth management network. However, Blockstream CEO Adam Back cautions that the process will be slower than expected. The bitcoin ETFs are a significant positive market signal, potentially more so than a pro-crypto US administration, but their impact will not be immediate. According to Back, institutional adoption is a gradual process, and investors do not make decisions overnight.
The build-up of investment can take up to a year or 18 months. Back notes that some of this investment is just beginning to happen and will occur slowly, creating a tailwind for the market.
The CEO of Blockstream, which offers self-custody wallets and other services to retail and institutional clients, also mentions that the regulatory environment has improved under the current US presidency, with a new legislative framework for crypto and the launch of a token shop. This openness to crypto business may encourage other jurisdictions to follow suit. While the US presidency may change, the established bitcoin ETFs have the power to transcend administrations, with major 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, which can lead to a bull run followed by a bear market.
Even if this cycle is breaking, the expectation of a price slide can become a self-fulfilling prophecy. However, with institutional flows, such as ETFs and sovereign investments, and investors buying bitcoin directly, the market may eventually see strength. Back also addresses concerns about quantum computing's potential to break Bitcoin's cryptography, stating that while it may be a factor, there is information asymmetry in the market, and institutions are more systematic about assessing risks.
They may consider even small tail risks, like the potential impact of quantum technology, and seek to mitigate them.