The recent entry of Morgan Stanley into the US spot bitcoin ETF market has been viewed by some as a catalyst for ending the current crypto 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 anticipated. Back, an early contributor to the Bitcoin community, notes that while bitcoin ETFs are a significant development, institutional adoption is a slow process. "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 make overnight decisions, and a build-up of investment could take up to a year or 18 months. Back also points out that the regulatory environment, particularly in the US, has improved under the current presidency, which has introduced a new legislative framework for crypto and launched its own token shop. This, in turn, has encouraged other jurisdictions to follow suit.
The establishment of bitcoin ETFs, Back believes, will have a lasting impact that transcends administrations. "One of the reasons to suppose the 'open for business' is going to stay, even as you get new administrations, is that now Black Rock and the other ETF providers are going to defend their business," he said.
Another factor to consider is bitcoin's cyclical nature, driven by the quadrennial halving event, which cuts the supply of new tokens by 50%. Back notes that even if this cycle is breaking, there is still a possibility of a price slide due to market expectations.
However, with the influx of institutional flows, such as ETFs, sovereign and sovereign wealth fund investments, and direct bitcoin purchases, the market is likely to see strength. Back also addresses concerns about quantum computing's potential impact on Bitcoin's cryptography, stating that while institutions may be paying attention to this risk, it is not a pressing concern for retail investors.