Why Adam Back Says Bitcoin Is the New Hurdle Rate

Adam Back describes Bitcoin as a long-term benchmark for capital allocation, value preservation, and treasury management. In his view, Bitcoin’s adoption has accelerated through distinct phases, expanding from early exchange users to ETFs, treasury companies, institutional buyers, and even sovereign-related exposure.

As Bitcoin trades above $100,000 and gains wider access through financial products, Back argues that the asset is no longer a niche technology story. He frames it as a better store of value technology, a hard money, and an increasingly central reference point for investors, companies, and governments.

Adam Back’s View of Bitcoin Today

Adam Back is known as the founder of Hashcash, the proof-of-work algorithm cited by Satoshi Nakamoto in the Bitcoin white paper. He is also co-founder and CEO of Blockstream and is preparing to lead a major Bitcoin treasury company going public with backing from Cantor Fitzgerald.

He sees Bitcoin’s current political, economic, and social reality as the result of a fast-moving adoption curve. According to Back, the pace is much faster than many would have expected even five years ago, when institutional buying, sovereign exposure, and government participation were far less imaginable.

The Three Waves of Bitcoin Adoption

Back breaks Bitcoin adoption into three phases that help explain how the asset reached its current position.

1. Early adopters and exchange access

The first wave was driven by early adopters who bought Bitcoin on exchanges. This marked the first broad phase of market participation once exchange access became available.

2. ETFs and broader investor access

The second wave came through ETFs. While ETPs and ETNs existed in different countries, spot ETF approvals in the US opened Bitcoin to a different group of investors, especially those who use brokers, financial advisors, and online share trading platforms.

Back notes that this made Bitcoin easier to access for savers and investors in traditional financial channels. He also points out that about 30% of the money in the BlackRock ETF is institutional, while the bulk comes from individual savers in the US.

3. Treasury companies and institutional buyers

The third wave is built around treasury companies and institutional buyers. These companies use Bitcoin as a treasury asset to protect cash reserves from inflation. This wave also includes pension funds, sovereign wealth funds, and indirect exposure through holdings in Bitcoin treasury companies and strategy ETFs built on top of Bitcoin or Bitcoin-focused firms.

Why Bitcoin Is the New Hurdle Rate

Back’s central argument is that Bitcoin should be the hurdle rate for long-term investing and long-term value preservation. Traditionally, a hurdle rate might be based on the prime rate or a government treasury rate of return. Back argues that Bitcoin now deserves that role instead.

He bases this on Bitcoin’s past decade performance and rolling performance over six-year periods across the last 15 years. In his description, Bitcoin has been the outlier asset class, outperforming most others and showing a good Sharpe ratio.

His idea is straightforward: if a strategy cannot outperform Bitcoin, then an allocation to Bitcoin may be the better choice.

• Bitcoin has outperformed most asset classes over long periods
• It can serve as a benchmark for long-term value preservation
• If a business or fund cannot beat Bitcoin, it may need to internalize Bitcoin exposure

Bitcoin as a Defensive Treasury Asset

Back explains the treasury company trend partly through inflation concerns. He points to the COVID era, when quantitative easing raised concerns about the spending power of corporate cash reserves.

He describes the decision by MicroStrategy as a defensive move aimed at preserving the spending power of roughly $500 million in cash reserves. After considering alternatives such as real estate and gold, the company settled on Bitcoin.

In Back’s framework, treasury companies benefit from two main forces:

1. Protection against inflation
2. Exposure to Bitcoin’s long-term performance curve, which he says is closely correlated with adoption because Bitcoin is still early stage

Why Treasury Companies Matter

Back distinguishes treasury companies from ETFs by emphasizing active management. An ETF can generally only hold the asset by mandate and carries annual management fees. A treasury company, by contrast, can use capital markets access to increase Bitcoin per share over time.

He says the objective of these companies is to increase Bitcoin per share, and that investors evaluate them through metrics such as:

• Past multiple of net asset value
• Speed of increasing Bitcoin per share
• Size and Bitcoin holdings
• Track record
• Execution of corporate actions

He also notes that market participants often view these companies in a way similar to a sector price-to-earnings comparison, using historical multiple of NAV and execution quality as indicators.

BSTR and the Bitcoin Standard Treasury Strategy

Back says the company he is working on, Bitcoin Standard Treasury, has an active mandate. Rather than only cold storing Bitcoin passively with an institutional custodian, the firm intends to seek returns on Bitcoin and also use hedged multi-strategy approaches.

He highlights several features of the planned company:

• Sean Bills serves as CIO
• The mandate includes seeking returns on Bitcoin
• The company aims to use active strategies rather than only passive storage
• It plans to bring these strategies to market inside the company

Back also says he is CEO of both Blockstream and Bitcoin Standard Treasury. He describes Blockstream primarily as a technology company, while Bitcoin Standard Treasury focuses on active strategies to derive yield from Bitcoin.

Fundraising and scale

Back says the fundraising process was completed in 36 days and raised about $1.3 billion. He describes this as roughly twice as much as the largest runner-up in terms of Wall Street institutional capital.

According to Back, the capital structure included:

• Equity PIPE
• A Bitcoin-denominated equity PIPE in the US, which brought in 5,000 Bitcoin
• Convertible notes
• A convertible perpetual preferred instrument

He says the underlying ticker is SEO and the proposed ticker after the business combination agreement is BSTR.

Bitcoin-first capital structure

One of the company’s differentiators, according to Back, is that most of the capital was Bitcoin. He says there are 25,000 Bitcoin in BSTR New, with additional PIPEs and converts coming in, making roughly two-thirds of the capital Bitcoin.

He contrasts this with companies that first raise money on Wall Street and then buy Bitcoin. In his telling, BSTR is bringing Bitcoin to Wall Street rather than taking Wall Street money to build a Bitcoin strategy.

Bitcoin as Apolitical Money

Back argues that Bitcoin is ultimately apolitical money. He compares it to gold in the sense that it is not affiliated with any politics, era, or religion. He says people across different cultures and political leanings will buy Bitcoin, just as different countries have historically held gold reserves.

For Back, the important lens is not politics but monetary technology. He describes Bitcoin as:

• A better store of value technology
• A better monetary technology
• A hard money
• A close analogue to commodity money

Even when governments or sovereign-related institutions gain exposure, he still frames Bitcoin as being viewed from an asset perspective, based on past performance and potential for continued adoption.

Government and Sovereign Exposure

Back says the improved regulatory environment in the US has encouraged more countries to approve access to Bitcoin products through tax-advantaged accounts and to open regulatory gates for financial institutions offering Bitcoin products.

He mentions several examples of sovereign-related exposure and reserve thinking:

• The US strategic reserve announcement
• Announcements from Pakistan about including Bitcoin in a strategic reserve
• Direct Bitcoin exposure in some sovereign wealth funds, including Abu Dhabi
• The Swiss National Bank having share allocation exposure through MicroStrategy

He also notes that in countries without approved Bitcoin ETFs, investors have often turned to proxy exposure through public company shares, including MicroStrategy and local treasury companies.

Why Back Thinks Every Company Could Become a Bitcoin Treasury Company

Back has said that every company will ultimately be a Bitcoin treasury company. His reasoning follows directly from his hurdle rate argument. If Bitcoin is the hurdle rate and most businesses or investment funds cannot outperform it, then the only way to compete is to internalize Bitcoin.

That means, in his view:

• Holding Bitcoin as a reserve
• Operating the business while buying more Bitcoin
• Reinvesting in the core business and using excess revenue to buy Bitcoin

He believes the addressable market for Bitcoin is enormous because it includes cash and monetary premium assets across the world. He says that premium exists across many asset classes, including bonds, stocks, real estate, and art, and that the total potential is in the hundreds of trillions of dollars.

Why It Is Still Early

Despite Bitcoin’s growth, Back says it is still early. He argues that there is still a long distance between the capital absorbed into Bitcoin today and the level implied by broad monetary adoption.

He expects that if adoption reaches that scale, Bitcoin would likely become more stable as the adoption curve saturates. For now, however, he sees substantial room for continued expansion across:

• Public companies
• Sovereign wealth funds
• Pension funds
• ETFs
• Advised portfolios
• Individual investors

Technology, Financial Rails, and Maturing Infrastructure

Back says Bitcoin has become more robust over time. He describes the technology as maturing, with higher quality assurance, easier use, more competition, and more providers.

He also emphasizes the growing interface between Bitcoin and traditional finance. ETFs, in his view, act as wrappers that bridge Bitcoin as a physical asset with the share, bond, and ETF world. This makes it easier to include Bitcoin in portfolios and use it as collateral.

He says Bitcoin is increasingly being seen as a good collateral asset because it is:

• Volatile
• Traded 24 by 7
• Extremely liquid

He adds that bringing Bitcoin into the traditional financial world improves capital efficiency and allows more cross-margin use across portfolios.

Blockstream, Liquid, and Tokenized Assets

Back explains that Blockstream supports securities on Bitcoin layer 2 through Liquid. He says there are about 4 billion of different kinds of real-world assets there, including tokenized treasury company shares such as MicroStrategy and Metanet.

He describes these as tradable 24 by 7 and priced in Bitcoin, offering different market access compared with markets in separate time zones and different currencies.

On Liquid, Back also points to the presence of:

• Tether stablecoin
• Shares
• Corporate bonds
• Small business loans
• Promissory notes

Stablecoins in Back’s Framework

Back describes the stablecoin as a more modern alternative to wire transfers that emerged from Bitcoin trading environments. He says stablecoins first solved inefficiencies in moving dollars or euros between trading venues and later became useful for small businesses and individuals as a low-friction transfer tool.

He says stablecoins now compete with remittance and wire transfer systems and have become major buyers of government bonds because they must protect the backing of the coins.

Within the Bitcoin ecosystem, he sees stablecoins as useful because they run on similar technology rails and allow dollar-denominated trading and settlement. On Liquid, he says this is particularly convenient for OTC trades and for trading dollar-correlated assets.

Bitcoin Adoption and the Internet Analogy

Back compares Bitcoin adoption to the spread of the internet. He recalls a period when companies were suspicious of connecting to the internet and preferred internal networks, only for most businesses to have an internet presence within about a decade.

He believes Bitcoin follows a similar pattern of new technology adoption:

• Initial suspicion
• Gradual familiarity
• Improved user access
• Learning of new concepts
• Growing confidence from observing other firms and asset managers

He also describes Bitcoin as a once-in-thousands-of-years evolution of a new hard money and an improved gold or store of value technology.

Use Cases Beyond Investment

Back does not frame Bitcoin only as an investment asset. He says the value proposition also matters in underbanked parts of the world, where people may lack bank accounts, PayPal access, or government ID.

In those environments, he says Bitcoin has stronger day-to-day retail payment use, including remittance and local use cases. In developed markets, he notes that inflation had often been low enough that people were less aware of currency debasement, but that this has changed in the post-COVID era with quantitative easing and M2 monetary expansion.

Short-Term Outlook

Back says Bitcoin is difficult to predict in the short term. His focus remains on the adoption curve, which he says is moving quickly through this third-wave era of productization within financial institutions.

He notes that many major financial institutions are still building training materials, procedures, and processes to make Bitcoin products available through mutual funds, managed products, and model portfolio recommendations. In his view, the market has not yet fully reflected the impact of these developments because that process is still underway.

FAQ

What does Adam Back mean by calling Bitcoin the hurdle rate?

He means Bitcoin should be the benchmark for long-term investing and value preservation. If a strategy cannot outperform Bitcoin, he argues that buying Bitcoin may be the better choice.

Why does Adam Back think Bitcoin adoption is moving faster than expected?

He says that five years ago, few would have expected institutional buying, sovereign exposure, government involvement, and broad financial product access to develop this quickly.

What are the three waves of Bitcoin adoption according to Adam Back?

They are early adopters using exchanges, broader access through ETFs, and the rise of treasury companies and institutional buyers using Bitcoin as a treasury asset.

Why are companies adopting Bitcoin as a treasury asset?

Back says companies are using Bitcoin to protect cash reserves from inflation and to benefit from Bitcoin’s long-term performance curve.

How does Adam Back distinguish treasury companies from ETFs?

He says ETFs mainly hold the asset by mandate and charge management fees, while treasury companies can actively use capital markets access to increase Bitcoin per share over time.

Does Adam Back view Bitcoin as political?

No. He describes Bitcoin as apolitical money, similar in general class to gold, and says people across cultures and political leanings will buy it.

What role do stablecoins play in Adam Back’s view?

He sees stablecoins as a modern alternative to wire transfers that help move dollars or euros efficiently, support trading and settlement, and operate on similar technology rails within Bitcoin-related markets.

Why does Adam Back say every company could become a Bitcoin treasury company?

Because if Bitcoin is the hurdle rate and most companies cannot outperform it, he argues that the way to compete is to internalize Bitcoin by holding it as a reserve and operating with Bitcoin exposure.

Original Source