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 cryptocurrency bear market, given the vast distribution potential of the company's $8 trillion wealth management network. However, according to Blockstream CEO Adam Back, an early contributor to the Bitcoin community, this shift will not happen overnight. Back, who has been tipped as the possible creator of Bitcoin, Satoshi Nakamoto, emphasizes that institutional adoption of bitcoin is a slow process.
"I think what people may have miscalculated is that institutional adoption is very slow," Back stated 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." Back suggests that investors do not make sudden, overnight decisions, and a build-up of investment could take up to a year or 18 months.
He notes that some of these developments are just beginning and will unfold gradually, indicating a positive trend for the market. As the CEO and co-founder of Blockstream, a company offering self-custody wallets, layer-2 network settlement, and asset issuance, Back has a deep understanding of the industry.
He is also the CEO and co-founder of BSTR, a bitcoin treasury company planning to go public via a SPAC merger. The regulatory environment has seen significant changes, particularly with the Trump administration introducing a new legislative framework for crypto and launching its own token shop. This has encouraged other jurisdictions to follow suit, such as the UK's FCA approving ETFs for retirement accounts.
Back believes that the establishment of bitcoin ETFs has given the industry new, powerful allies in companies like Black Rock, Morgan Stanley, and Fidelity, which will defend their business interests. Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event.
Even if this cycle is breaking, as some commentators believe, there is still a possibility of a price slide due to market expectations. However, with institutional flows, sovereign investments, and investors buying bitcoin directly or shares in bitcoin treasury companies, the market is seeing signs of strength. Back also addressed concerns about quantum computing's potential to break Bitcoin's cryptography, stating that while institutions may be paying attention to this risk, it is not an immediate concern.
Overall, Back's insights provide a nuanced view of the growing institutional investment in bitcoin and the factors shaping the cryptocurrency market.