MIAMI BEACH — Bitcoins The recent decline has frustrated investors who expected a smoother ride after a flurry of institutional milestones, but Adam Back, one of the early cypherpunks cited in Bitcoin’s 2008 white paper, said the volatility shouldn’t surprise longtime observers.
“Bitcoin is generally volatile,” Back said at the iConnections conference in Miami Beach on Tuesday. “There is a lot of positive news […] and in the previous four year market cycles, this was pretty much a period of a cycle where prices were falling.
He suggested that some market participants might trade according to this historical pattern rather than reacting to fundamentals. “There was some expectation or possibility that because there are different types of investors, the market might be different. So I think some people think the price might come back later in the year.”
Bitcoin entered the year with a tailwind. A more cryptocurrency-friendly administration in Washington and long-awaited regulatory clarification around spot exchange-traded funds (ETFs) should enable deeper institutional participation.
For many investors, it was also a testing ground. Bitcoin’s core argument has long centered on scarcity and independence from government monetary policy and the creation of a digital store of value designed to guard against currency depreciation. At a time when US budget deficits remain large and questions about the long-term purchasing power of the dollar persist, the context seems to fit this thesis.
However, the market did not follow the script. Bitcoin is down about 26% over the past year, even as the political environment has become more favorable and institutional access has improved. Instead of decoupling from macroeconomic uncertainty, the asset has at times traded in line with broader risk markets.
Meanwhile, traditional safe havens have recovered. Gold hit new all-time highs, with silver also hitting multi-year highs. Capital seeking shelter from inflationary concerns and geopolitical risks appears to have flowed, at least in part, into metals rather than digital assets.
Back, who is now CEO of Blockstream as well as the Bitcoin Standard Treasury Company (BSTR), also highlighted the structural dynamics of Bitcoin holders.
“ETF holders […] “Retail participants often deploy most of their capital during rallies, leaving little dry powder during downturns. Institutions, on the other hand, can rebalance their portfolios.
Still, Back cautioned that institutional adoption remains early. “I think there’s not a lot of institutional capital yet.”
He said large pools of capital have yet to fully enter the market, although significant regulatory hurdles have been overcome and clearer rules could pave the way for more institutional inflows.
Over time, he expects wider adoption to reduce volatility. He compared Bitcoin’s current phase to early high-growth stocks. “You can look at analogies, for example, with early shares of Amazon (AMZN), whose prices saw wild swings, essentially because the market was uncertain.”
“The rapid adoption type of curve inherently leads to volatility,” he said. As adoption matures and more institutions, companies and sovereigns gain visibility, Back said Bitcoin price fluctuations should moderate. He doesn’t expect the volatility to go away, but he believes it could start to resemble gold, which trades with less dramatic moves than a younger asset.
Back also said he measured Bitcoin’s long-term potential against the total market value of gold. He argued that comparing the two market caps offers a rough benchmark for adoption and that, he said, bitcoin today remains about 10 to 15 times smaller than gold, suggesting room for further growth if it continues to capture share as a store of value.
Despite short-term price fluctuations, Back argued that Bitcoin’s long-term investment case remains intact. “Bitcoin as an asset class has stood out above everything, and every other asset class over the last decade in general, by providing the highest annualized return,” he said.
For Back, volatility is not a contradiction with the Bitcoin thesis but a characteristic of its adoption phase. “Volatility […] is part of the picture,” he said.
