The recent entry of Morgan Stanley into the US spot bitcoin ETF market has been viewed 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 most people think. According to Back, the introduction of bitcoin ETFs is a significant development, but institutional adoption takes time.
"I think what people may have miscalculated is that institutional adoption is very slow," Back stated in an interview. "The fund managers haven't allocated the recommended 2% to 4% to bitcoin yet, but they will, and it's slower than people anticipate." Back notes that investors do not invest overnight and that the build-up of institutional investment can take up to a year or 18 months. "Some of that stuff is just starting to happen, and it will happen slowly. So I think there's a tailwind," he added.
As the CEO of Blockstream, a company that offers self-custody wallets and asset issuance to retail and institutional clients, Back has a unique perspective on the market. He also co-founded BSTR, a bitcoin treasury company aiming to go public via a SPAC merger. The regulatory environment has also improved, with the current US presidency 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 established bitcoin ETFs have the power to transcend administrations, with companies like BlackRock and Morgan Stanley defending their business interests. Another factor to consider is bitcoin's cyclical nature, driven by the quadrennial halving event.
While some commentators believe the four-year cycle is breaking, Back notes that the possibility of a price slide remains due to market expectations. However, institutional flows, such as ETFs and sovereign wealth fund investments, are changing the market dynamics. "They are growing their ability to buy bitcoin in different market conditions," Back said.
"Those recurring buyers plus new institutional and wealth management buyers will eventually overwhelm the sellers." Additionally, Back addressed concerns about quantum-computing hardware progressing faster than expected and its potential impact on Bitcoin's cryptography. While he acknowledges that institutions are paying attention to the risk, he believes that the recent round of quantum doomsaying may be overblown.