The recent participation of Morgan Stanley in the US spot bitcoin ETF market has been viewed by some as a catalyst for ending the current cryptocurrency bear market, thanks to the vast distribution capabilities of the company's $8 trillion wealth management network. However, Blockstream CEO Adam Back has cautioned that the process will be slower than expected.
Back, who is also an early contributor to the Bitcoin community and has been speculated to be the pseudonymous creator of Bitcoin, Satoshi Nakamoto, believes that while bitcoin ETFs are a crucial development for the market, institutional adoption will take time. According to Back, the fund managers have not yet allocated the recommended 2% to 4% of their portfolios to bitcoin, and this process will be gradual, potentially taking up to a year or 18 months to materialize. He also notes that the build-up of institutional investment will be a slow process, but it will eventually create a tailwind for the market. The impact of government regulations on the industry should not be underestimated, as the current pro-crypto US administration has introduced a new legislative framework for cryptocurrency and launched its own token shop.
This has encouraged other jurisdictions to follow suit, with the UK's Financial Conduct Authority approving ETFs for retirement accounts. Back also points out that the establishment of bitcoin ETFs has given the industry new allies, including BlackRock, Morgan Stanley, and Fidelity, which will defend their business interests and lobby against any potential interference. Another factor influencing bitcoin's price is its cyclical nature, driven by the quadrennial halving event, which reduces the supply of new tokens by 50%. While some commentators believe that this cycle may be broken, Back suggests that the possibility of a price slide remains, driven by market expectations.
However, the influx of institutional flows, including sovereign and sovereign wealth fund investments, will eventually overwhelm the sellers and drive the market forward. Additionally, the growth of bitcoin treasury companies, such as MicroStrategy, will provide a new source of demand for the cryptocurrency.
Back has also addressed concerns about the potential impact of quantum computing on Bitcoin's cryptography, stating that while it is a factor, it is not an immediate concern. Institutions, however, will be more systematic about assessing and mitigating this risk, and will likely take a long-term view of the potential threats and opportunities presented by quantum technology.