MIAMI BEACH – Bitcoin The recent drop has frustrated investors hoping for a smoother ride after a wave of institutional milestones, but Adam Back, one of the first cypherpunks cited in the 2008 Bitcoin white paper, said the volatility should not surprise long-time 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 has been a time in the cycle when prices go down.”
He suggested that some market participants might be trading around that historical pattern rather than reacting to the fundamentals. “There was some expectation or possibility that because there are different types of investors, the market may be different. So I think some people are thinking that the price could go up again later this year.”
Bitcoin entered the year with a tailwind. A more crypto-friendly administration in Washington and long-awaited regulatory clarity around spot exchange-traded funds (ETFs) were expected to unlock deeper institutional participation.
For many investors, this was also intended to be a testing ground. Bitcoin’s core narrative has long focused on scarcity and independence from government monetary policy and being a digital store of value designed to protect against currency debasement. At a time when U.S. fiscal deficits remain large and doubts persist about the dollar’s long-term purchasing power, the backdrop seemed aligned with that thesis.
However, the market has not followed the script. Bitcoin is down about 26% over the past year, even as the political environment became more favorable and institutional access improved. Rather than decoupling from macroeconomic uncertainty, the asset has at times traded in line with broader risk markets.
Meanwhile, traditional safe havens have recovered. Gold has hit new all-time highs and silver has also hit multi-year highs. Capital seeking refuge from concerns about inflation and geopolitical risk appears to have flowed, at least in part, into metals rather than digital assets.
Back, who is now the CEO of Blockstream and Bitcoin Standard Treasury Company (BSTR), also pointed out the structural dynamics of who owns bitcoin.
“ETF holders […] “Retail investors 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 is still early. “I think there’s still not that much institutional capital.”
In his view, large amounts of capital have yet to fully enter the market, even though major regulatory hurdles have been resolved and clearer rules could pave the way for more institutional entries.
Over time, he hopes broader adoption will reduce volatility. He compared the current phase of bitcoin to early high-growth stocks. “You can see analogies to, say, early Amazon (AMZN) stock, which had big price swings, basically because the market was uncertain.”
“The fast adoption type of curve inherently brings volatility,” he said. As adoption matures and more institutions, companies and sovereigns gain exposure, Back said bitcoin price swings should moderate. He doesn’t expect the volatility to go away, but he thinks it could start to look like gold, which trades with less dramatic moves than a younger asset.
Back also said he measures bitcoin’s long-term potential against the total market value of gold. He argued that comparing the two market capitalizations offers a rough benchmark for adoption and, in his view, bitcoin is still roughly 10 to 15 times smaller than gold today, suggesting room for further growth if it continues to capture share as a store of value.
Despite the short-term price swings, Back argued that bitcoin’s long-term investment case remains intact. “Bitcoin as an asset class has stood out from everything, all other asset classes over the last decade in general, by having 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 […] “It’s part of the picture,” he said.
