Now that Bitcoin is down over 40% from its fall highs and hitting its lowest levels in weeks, crypto market sentiment has turned undeniably bearish.
However, Adam Back, the CEO of Blockstream and the inventor of the Hashcash proof-of-work system, sees a silver lining in the current downturn.
During a conversation with CNBC’s Melissa Lee, Back argued that lower crypto prices could be beneficial for Bitcoin Standard Treasury (BST), his upcoming venture.
The treasury advantage
Back is currently preparing for a SPAC approval for Bitcoin Standard Treasury, which is estimated to occur around April.
According to the crypto pioneer, lower Bitcoin prices during this pre-listing window would make it possible for the company to purchase more coins for its treasury.
“Depending on where the Bitcoin price is, if it holds at this level, that’s actually to our advantage,” Back explained. “Because we go out with a lower reference price and are able to buy more Bitcoin, making our way up the rung to probably number three in the global ranks of Bitcoin treasury companies by holdings.”
Treasury companies “take Bitcoin off the market” to hold and accumulate, Back says.
A liquidity crunch
Some market observers are puzzled by the inability of institutional adoption to propel crypto prices. Back has attributed this to liquidity-related difficulties among retail investors.
Traditional mutual funds can reallocate capital, but Bitcoin retail investors typically lack dry powder during such extremely severe market downturns.
“I think Bitcoin tends to be a little weak to the downside because many of the retail investors end up being all in. And so they don’t have a lot of capital to buy Bitcoin,” Back said. “Whereas if you look at public company stocks or big mutual funds… they might sell some Microsoft and buy some Tesla if they think Tesla’s cheaper at a given level. With Bitcoin, most of the investors are all in, so they don’t have that ability to sell something else to reallocate.”
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