Bitcoin has recently experienced a decline exceeding 40% from its previous peak, reaching some of the lowest values seen in weeks. This significant drop has shifted the overall mood within the cryptocurrency market to a decidedly pessimistic tone.
Nevertheless, Adam Back, who leads Blockstream as CEO and is known for creating the Hashcash proof-of-work algorithm, finds an optimistic perspective amid this downturn.
In an interview with CNBC’s Melissa Lee, Back highlighted that falling crypto prices might actually present an opportunity for his forthcoming project, Bitcoin Standard Treasury (BST).
The Benefit of Lower Prices
Back is currently working towards securing SPAC approval for Bitcoin Standard Treasury, which is anticipated around April.
The crypto innovator explained that reduced Bitcoin prices during this crucial pre-listing phase could enable BST to acquire a larger quantity of coins for its treasury holdings.
“If Bitcoin maintains these levels,” Back noted, “it works in our favor because we start with a lower reference price and can accumulate more Bitcoins. This strategy could help us climb to approximately third place among global Bitcoin treasury holders by volume.”
He further clarified that treasury companies function by removing Bitcoins from circulation to hold and build their reserves over time.
Challenges in Market Liquidity
Certain analysts remain perplexed about why institutional interest hasn’t driven up cryptocurrency prices more robustly. According to Back, this phenomenon stems largely from liquidity constraints faced by retail investors.
Unlike traditional mutual funds that can shift capital between assets fluidly, many individual Bitcoin investors are fully invested without additional funds available during steep market declines.
“Bitcoin tends to be vulnerable on the downside because numerous retail participants are completely committed,” said Back. “They lack spare capital needed to purchase more BTC when prices fall. In contrast, if you consider public equities or large mutual funds, they have flexibility — selling shares like Microsoft stock to buy others such as Tesla if valuations appear favorable.
With most Bitcoin holders being all-in on their investment, taking similar reallocation actions isn’t feasible.”