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, given the vast distribution power of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back cautions that this process will take longer than expected.
Back, an early contributor to the Bitcoin community, notes that while bitcoin ETFs are a significant development, institutional adoption is slower than anticipated. "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 immediately invest; instead, a build-up could take a year or even 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. Back also discussed the impact of the US presidency on the crypto industry, stating that the current administration has introduced a new legislative framework for crypto and launched its own token shop. This has encouraged other jurisdictions to follow suit, such as the UK's Financial Conduct Authority approving ETFs for retirement accounts.
Back believes that the established bitcoin ETFs have the power to transcend administrations, whether Republican or Democrat, and that companies like BlackRock and Morgan Stanley will defend their business interests in the bitcoin ETF. 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, he believes that institutional flows, such as ETFs and sovereign wealth fund investments, will eventually overwhelm the sellers. Additionally, Back addressed concerns about quantum-computing hardware progressing faster than expected and its potential to break Bitcoin's cryptography.
While he acknowledges that institutions may be paying attention to this risk, he believes that it is not a significant factor in the current market. Overall, Back's insights provide a nuanced view of the institutional investment landscape in bitcoin, highlighting both the potential for growth and the challenges that lie ahead.