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

Author: Helene Braun

Translation: Deep Tide TechFlow

Deep Tide Guide: In light of recent sharp fluctuations and pullbacks in Bitcoin, market sentiment is anxious. Early Bitcoin pioneer Adam Back pointed out at the Miami conference that this volatility is entirely consistent with the four-year cycle history and does not indicate a breakdown of investment logic. He believes institutional funding is still in its very early stages, and as adoption expands, Bitcoin will experience “wild swings” similar to early Amazon stocks, eventually maturing. This article provides an in-depth look at this cryptography OG’s insights on the current market.

Key Highlights:

Adam Back, an early figure cited in Bitcoin’s original white paper, states that the recent decline in this cryptocurrency aligns with past four-year cycle patterns, reflecting its inherent volatility rather than a collapse of investment fundamentals.

Despite a more friendly US policy environment 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 surged.

Back believes that institutional participation in Bitcoin remains in its early stages. Over time, broader adoption will help smooth out sharp price fluctuations.

After a series of milestone institutional entries, investors initially expected a more stable trend, so Bitcoin’s recent decline has been disappointing. However, Adam Back, one of the early cypherpunks cited in the 2008 Bitcoin white paper, says long-term observers shouldn’t be surprised by this volatility.

“Bitcoin is usually volatile,” Back said at the iConnections conference in Miami Beach on Tuesday. “Although there’s a lot of good news […] in the past four-year market cycles, we’re pretty much at a low-price cycle point.”

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

Many anticipated that a more crypto-friendly Washington policy 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. Bitcoin’s core selling points have long been its scarcity, independence from government monetary policy, and its role as a digital store of value to hedge against currency devaluation.

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

However, the market has not followed the script. Over the past year, despite 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 moves in tandem with broader risk markets.

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

Back, who is currently CEO of Blockstream and Bitcoin Standard Treasury Company (BSTR), also highlights structural changes among Bitcoin holders.

“ETF holders […] are more sticky investors than retail traders,” he said. Retail investors tend to invest most of their funds during bull markets, leaving them with less “dry powder” during downturns. In contrast, institutions can rebalance across their portfolios.

Nevertheless, Back warns that institutional adoption is still in its early stages. “I don’t think there’s that much institutional money in yet.”

He believes that a large pool of capital has not fully entered the market, even though major regulatory hurdles have been cleared. Clearer rules are expected to pave the way for more institutional inflows.

He predicts that over time, broader adoption will reduce volatility. He compares 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 due to market uncertainty.”

“This rapid adoption curve itself comes with volatility,” he said. Back expects that as adoption matures and more institutions, companies, and sovereign nations gain exposure, Bitcoin’s price fluctuations should moderate. He doesn’t believe volatility will disappear entirely but thinks Bitcoin will start to resemble gold, with less extreme trading swings than younger assets.

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

Despite short-term price swings, 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 early adoption phase. “Volatility is part of the big picture,” he said.