The recent entry of Morgan Stanley into the US spot bitcoin ETF market has been seen by some as a catalyst for ending the current crypto bear market, thanks to the vast distribution power of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back, a renowned cryptographer and early contributor to the Bitcoin community, believes that the process will take longer than anticipated.
In an interview with Coindesk, Back stated that the ETFs are a significant development, but institutional adoption is a slow process. He noted that even when major institutions like BlackRock recommend a 2-4% allocation of bitcoin in their portfolios, the actual implementation can take time.
According to Back, investors do not rush into the market overnight, and a build-up of investments can take up to a year or 18 months. Despite the slow pace, Back sees a positive trend emerging, driven by the growing interest of institutional investors in bitcoin. The company he co-founded, Blockstream, offers self-custody wallets, layer-2 network settlement, and asset issuance to retail and institutional clients. Back also serves as the CEO and co-founder of BSTR, a bitcoin treasury company planning to go public via a SPAC merger.
The current regulatory environment, with a more crypto-friendly US presidency, has also contributed to the growing interest in bitcoin. Back pointed out that the introduction of a new legislative framework for crypto and the launch of a token shop by the US government have encouraged other jurisdictions to follow suit.
The approval of ETFs for retirement accounts in the UK and other countries is a testament to this trend. While the political landscape may change, the establishment of bitcoin ETFs has created a new ally for the industry in the form of major financial institutions like BlackRock, Morgan Stanley, and Fidelity.
These institutions will likely defend their interests in the bitcoin market, ensuring that the 'open for business' sentiment persists even with changes in administration. Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event. Although some commentators believe that this cycle may be breaking, Back suggests that the possibility of a price slide remains due to market expectations.
However, with the growing strength of institutional flows, including ETFs, sovereign investments, and direct purchases of bitcoin, the market is likely to see a shift in sentiment. Back also addressed 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 significant factor in the current market. Overall, Back's assessment suggests that while the influx of institutional investment in bitcoin is a positive development, it is a gradual process that will take time to unfold.