Institutional Investment in Bitcoin is Forthcoming, but Progress is Slower than Anticipated, According to Adam Back

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 is slower than many people think. Back, an early contributor to the Bitcoin community, notes that while bitcoin ETFs are a significant development, institutional adoption takes time.

"I think what people may have miscalculated is that institutional adoption is very slow", he said in an interview. The process of fund managers allocating 2% to 4% of their portfolio to bitcoin, as recommended by BlackRock, is gradual and may take up to a year or 18 months. Back believes that despite the slow pace, there is a positive market trend. As the CEO of Blockstream, a company offering self-custody wallets and asset issuance, Back is well-versed in the industry's developments.

The company's bitcoin treasury arm, BSTR, is also set to go public via a SPAC merger. 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 has encouraged other jurisdictions to follow suit, with the UK's FCA approving ETFs for retirement accounts.

Back notes that the established bitcoin ETFs have the power to transcend administrations, with companies like BlackRock and Morgan Stanley defending their business interests. Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event.

While some commentators believe this cycle may be breaking, Back suggests that the possibility of a price slide remains due to market expectations. However, institutional flows, such as ETFs and sovereign investments, are changing the market dynamics. Companies like MicroStrategy are growing their ability to buy bitcoin in different market conditions, which will eventually overwhelm the sellers.

Back also addresses concerns about quantum computing's potential impact on Bitcoin's cryptography, stating that while it may be a factor, there is a lot of information asymmetry in the market. Institutions are more systematic about risk and may be paying attention to the recent quantum doomsaying, but retail investors are less concerned.