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 crypto bear market, given the vast distribution capabilities of the Wall Street wirehouse's $8 trillion wealth management network. However, Blockstream CEO Adam Back, an early contributor to the Bitcoin community, cautions that this process will take longer than anticipated. Back notes that while bitcoin ETFs are a significant development, institutional adoption is a slow process. He mentions that even when major institutions like BlackRock recommend a 2-4% allocation to bitcoin in their portfolios, fund managers have not yet acted on this advice, and it may take up to a year or 18 months for this to happen.
Back also highlights the impact of regulatory changes, particularly in the US, where the current presidency 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 FCA approving ETFs for retirement accounts.
The establishment of bitcoin ETFs has the potential to transcend administrations and has garnered support from major institutions like BlackRock, Morgan Stanley, and Fidelity, which will defend their business interests in the bitcoin market. Additionally, Back discusses the cyclical nature of bitcoin's price, driven by the quadrennial halving event, and the potential for a price slide due to market expectations. However, he believes that institutional flows, such as ETFs and sovereign investments, will eventually overwhelm sellers and drive the market forward.
Back also addresses concerns about quantum computing's potential to break Bitcoin's cryptography, stating that while it may be a factor, institutions are more systematic about risk and will consider even small tail risks. Overall, Back sees a positive outlook for bitcoin, with institutional investment and regulatory support driving growth, albeit at a slower pace than expected.