Post
Topic
Board Economics
Re: High prices mean even higher volatility
by
Hydrogen
on 12/12/2017, 23:47:04 UTC
Bitcoin is not becoming less volatile

Why do you people not read the OP? I mentioned there that Bitcoin is going even more volatile as the price rises. And yes, I mean relative changes, I think in relative changes if you please, i.e. changes in percentages specifically. I've even given an example above which proves that. Now we just need Bitcoin to go down as low as 6-7k dollars to prove me right. Or we could at first surge as high as 25k and then fall back to 10k dollars. This is not because of external factors affecting Bitcoin (though they certainly do). This is due to Bitcoin limited supply and the inverse relationship between Bitcoin supply and its price, most of the time

Here are specific arguments for bitcoin becoming less volatile.

#1 Fork announcements and deployments are having a smaller percentage effect on bitcoin price as time goes on. Bitcoin's price is moving less and less everytime news of a new fork emerges. Back in the days of Bitcoin Unlimited and during the first fork known as Bitcoin Cash, BTC's price fluctuated wildly. As time goes on, and we see new forks emerge such as bitcoin gold, we see a less volatile bitcoin.

#2 SEC announcements regarding bitcoin ETF's are having less of an effect on price. Earlier this year, the SEC ruled not to approve a bitcoin ETF. I think that may have had a 10% to 20% effect on bitcoin price. There may have been a second ruling which had a far reduced effect on bitcoin volatility although I'm going purely from memory here.

#3 Criticism of bitcoin from Jamie Dimon and others is having less of an effect on price. I think years ago when Paul Krugman criticized bitcoin it may actually have had an effect on price. Today when Jamie Dimon and economists awarded nobel prizes in their field criticize bitcoin, it appears to have little or no effect.

#4 Events such as china banning bitcoin exchanges is having less of an effect. When china banned bitcoin around 2014 it had a massive effect on bitcoin's value. Compare to 2017 when china banned exchanges once again with a far more limited effect on price.

As time goes on and things like forks are better quantified and better known phenomena. It would appear that bitcoin's value fluctuates less. There is less fear and anxiety from traders and it might be fair to say bitcoin is more stable as a result. Bitcoin becoming more decentralized and evenly spread throughout the world (rather than centralized in china) could also contribute more to stability and lower volatility over time.

There's a generic statement I used here which says: "less of an effect on price". That is to imply a reduced net percentage effect, rather than measured in dollars, euros, rupies, etc.