Early Bitcoin architect Adam Back: BTC has never failed, the pain is just the cost of growth

Author: Helene Braun

Translation: Deep Tide TechFlow

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Key Highlights:

Early figure Adam Back, who was cited in the original Bitcoin white paper, stated that the recent decline in this cryptocurrency is consistent with the performance over the past four-year cycle, reflecting its inherent volatility rather than a breakdown in investment logic.

Despite a more friendly policy environment in the U.S. and the launch of spot Bitcoin ETFs, Bitcoin has still fallen about 26% over the past year, while traditional safe-haven assets like gold and silver have experienced significant gains.

Back believes that institutional participation in Bitcoin is still in its early stages, and over time, broader adoption will help smooth out sharp price fluctuations.

After a series of milestone events involving institutional entry, investors initially expected the trend to stabilize, so Bitcoin’s recent decline has disappointed them; however, Adam Back, one of the early cypherpunks cited in the 2008 Bitcoin white paper, said that long-term observers should not be surprised by this volatility.

“Bitcoin is usually volatile,” Back said at the iConnections conference in Miami Beach on Tuesday. “Although there is a lot of good news [...] in the past four-year market cycle, we are roughly at a point where prices are trending downward.”

He pointed out that some market participants might be trading around this historical pattern rather than reacting to fundamentals. “There was a market expectation or possibility that, because now there are different types of investors, market conditions might be different. So I think some people believe prices could rebound later this year.”

Many expected that a more friendly crypto policy from Washington and the long-awaited regulatory clarity for spot ETFs would unlock deeper institutional participation this year.

For many investors, this is also a litmus test. For a long time, Bitcoin’s core selling points have revolved around scarcity, independence from government monetary policy, and as a digital store of value designed to hedge against currency devaluation.

Against the backdrop of high U.S. fiscal deficits and ongoing doubts about the long-term purchasing power of the dollar, the broader environment seems highly aligned with this investment thesis.

However, the market did not follow the script. Over the past year, even with a more supportive policy environment and improved channels for institutional entry, Bitcoin still declined about 26%. The asset has not decoupled from macro uncertainties and often resonates in tandem with broader risk markets.

Meanwhile, traditional safe-haven assets have risen. Gold hit record highs, and silver reached multi-year highs. Funds seeking to hedge inflation concerns and geopolitical risks seem to have at least partially flowed into precious metals rather than digital assets.

Currently, Back, who is CEO of Blockstream and Bitcoin Standard Treasury Company (BSTR), also pointed out structural changes within the Bitcoin holder community.

“ETF holders [...] are more sticky investors than retail traders on exchanges,” he said. Retail investors typically invest most of their funds during bullish runs, leaving them with “dry powder” during downturns. In contrast, institutions can rebalance across their entire portfolios.

Nevertheless, Back warned that institutional adoption is still in its early stages. “I don’t think there’s that much institutional capital coming in right now.”

In his view, large pools of capital have not yet fully entered the market, even though major regulatory hurdles have been cleared. More explicit rules are expected to pave the way for increased institutional inflows.

He predicts that over time, broader adoption will reduce volatility. He compared Bitcoin’s current stage to early high-growth stocks. “You can look at some analogies, like early Amazon (AMZN) stock, which experienced wild swings, mainly because the market was full of uncertainty.”

“This rapid adoption curve itself comes with volatility,” he said. Back believes that as adoption matures and more institutions, companies, and sovereign nations gain exposure, Bitcoin’s price fluctuations should moderate. He does not think volatility will disappear entirely, but he believes Bitcoin will start to resemble gold, with less dramatic trading than younger assets.

Back also mentioned that he measures Bitcoin’s long-term potential against the total market value of gold. He believes comparing their market caps can provide a rough benchmark for adoption; currently, Bitcoin’s market cap is still about 10 to 15 times smaller than gold’s, meaning there is significant room for growth if Bitcoin continues to serve as a store of value.

Despite short-term price fluctuations, Back maintains that the long-term investment thesis for Bitcoin remains solid. “As an asset class, Bitcoin has stood out over the past decade, outperforming all other asset classes with the highest annualized returns,” he said.

For Back, volatility is not at odds with Bitcoin’s investment logic but is a feature of its adoption phase. “Volatility is part of the big picture,” he said.