Author: Helene Braun

Translated by: Shenchao TechFlow

Senchao Introduction: In the face of Bitcoin's recent dramatic fluctuations and corrections, market sentiment is anxious. Early Bitcoin pioneer Adam Back pointed out at the Miami conference that such volatility is completely in line with the historical patterns of a four-year cycle, and does not signify a collapse of investment logic. He believes that institutional funds are still in the very early stages of entering the market, and as adoption increases, Bitcoin will experience a "wild volatility" similar to that of early Amazon stocks, eventually maturing. This article provides insight into the profound understanding of this cryptocurrency OG regarding the current market situation.

Key Highlights:

• Adam Back, an early figure referenced in the original Bitcoin white paper, stated that the recent decline of this cryptocurrency aligns with past four-year cycle performance, reflecting its inherent volatility rather than a collapse of investment logic.
• Despite the US policy environment becoming more favorable and the launch of a spot Bitcoin ETF, Bitcoin has still fallen about 26% over the past year, while traditional safe-haven assets like gold and silver have seen significant increases.
• Back believes that institutional participation in Bitcoin is still in the early stages, and over time, wider adoption will smooth out the dramatic fluctuations in price.

After experiencing a series of milestone events for institutional entry, investors had hoped for a more stable trend, so Bitcoin's recent decline has frustrated them; however, Adam Back, one of the early cypherpunks referenced in the 2008 Bitcoin white paper, stated that long-term observers should not be surprised by this volatility.

"Bitcoin is usually volatile," Back said at the iConnections conference held in Miami Beach on Tuesday. "While there is a lot of good news [...] this is pretty much at a point in the market cycle where the price is going down in the past four years."

He pointed out that some market participants may be trading around this historical pattern rather than reacting to fundamentals. "There has been an expectation or possibility in the market that things might be different now that there are different types of investors, so I think some people feel that prices might rebound later this year."

Many had anticipated that a more favorable crypto policy from Washington and the long-awaited regulatory transparency on 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 a persistently high US budget deficit and ongoing questions about the long-term purchasing power of the dollar, the overall environment seems to align closely with this investment logic.

However, the market did not follow the script. Over the past year, even as the policy environment became more supportive and institutional entry channels improved, Bitcoin still fell about 26%. The asset did not decouple from macroeconomic uncertainty and often resonated with broader risk markets.

Meanwhile, traditional safe-haven assets have seen increases. Gold has risen to historic highs, and silver has also reached multi-year highs. Funds seeking to evade inflation concerns and geopolitical risks seem to have flowed into precious metals, at least in part, rather than digital assets.

Currently serving as the CEO of Blockstream and Bitcoin Standard Treasury Company (BSTR), Back also pointed out the structural changes in the Bitcoin holding community.

"ETF holders [...] are more sticky investors than retail investors in exchanges," he said. Retail investors typically invest most of their funds during rising markets, leading to a lack of "ammunition" (dry powder) when prices fall. In contrast, institutions can rebalance across their entire portfolios.

Nonetheless, Back warned that institutional adoption is still in its early stages. "I don't think there is that much institutional money entering the market right now."

In his view, large pools of capital have not fully entered the market, despite major regulatory barriers being cleared, and clearer rules are expected to pave the way for more institutional funds to flow in.

He anticipates that, over time, wider adoption will reduce its volatility. He compared Bitcoin's current phase to early high-growth stocks. "You can refer to some analogies, like early Amazon (AMZN) stocks, which had crazy volatility in price, primarily because the market was filled with uncertainty."

"This rapid adoption curve itself is accompanied by volatility," he said. Back stated that as the adoption rate matures and more institutions, companies, and sovereign nations gain exposure, Bitcoin's price volatility should begin to ease. He does not believe volatility will disappear completely, but he is confident that Bitcoin will begin to behave more like gold, with its trading intensity lower than that of younger assets.

Back also stated that he measures Bitcoin's long-term potential using gold's total market capitalization. He believes that comparing the market capitalizations of the two can provide a rough benchmark for adoption rates; in his view, Bitcoin's size is still about 10 to 15 times smaller than gold, which means that if Bitcoin continues to capture market share as a store of value, it has significant room for growth.

Despite the short-term price fluctuations, Back believes that the long-term investment logic of Bitcoin remains solid. "As an asset class, Bitcoin has stood out over the past decade, outperforming all other asset classes with the highest annualized return," he said.

For Back, volatility is not contrary to Bitcoin's investment logic, but rather a characteristic of its adoption phase. "Volatility is part of the bigger picture," he said.