Re: High prices mean even higher volatility

I don't fully understand the logic behind there being more volatility at higher prices, in terms of dollar swings then sure but in terms of percentage swings I don't see how the higher price could lead to that? In fact I probably see more of the opposite, higher prices generally will mean more adoption, more adoption means money better spread means less possibilities for manipulation.

I'm curious what you actually see

Because if you looked at price charts you would certainly see the opposite picture. For example, when Bitcoin first reached the 6k dollar mark it crashed back to 4k, then it went up to almost 8k and corrected to 5.4k. Now we are at 15k, and how low do you think we will go? Further, there is no adoption of Bitcoin in real economy. Steam just dropped it. It is adoption between speculators, but I can't fathom how that could mean less volatility. In fact, it does the opposite

I do not mean from a historical point of view I am speaking from a purely theory based point of view. I do not see the logical connect between prices being higher leading to more volatility in percentage terms. Of course we can look back and see that there is more volatility lately but I think that is because with the increasing price bitcoin are changing hands far more often. If we were to reach a higher price and be relatively stable there I do not see how that would cause more volatility in itself.

Okay, let's speak theory here

If we proceed from the fact that the supply of bitcoins is limited, higher prices may mean less supply provided the coins are being stashed away (which they are). The latter necessarily means that there is no direct relationship between prices and supply (i.e. the higher the price, the higher the supply), which is the case with goods or assets the supply of which can be increased (for example, due to expansion of production). This, in its turn, means that a smaller number of coins can cause stronger price changes or fluctuations, i.e. volatility. In other words, Bitcoin becomes susceptible to sudden bursts of volatility when some whale decides to buy into or cash out of Bitcoin

In this scenario there would certainly be bigger percentage swings on a less frequent basis (those times you mentioned when a whale sells/buys) but on a daily basis it could suggest the opposite. Given as you said more people would be holding their coins there would be less coins in active circulation and so those trades that do occur will be with a smaller amount of coins and therefore less able to greatly influence the price. I think realistically there are two ways of looking at it and you can't say with certainty that one or the other will happen

Yes, this is what I mean

In these circumstances, the market will be thin at higher prices, so at first the price should surge to the moon (due to supply running dry) and then, whenever a whale (or two) finally decides to cash out, we will see a monumental crash. Obviously, we are at phase 1 of this cycle and if we see the phase 2, at which the price should go down, say, to 6-7k dollars or below, then my hypothesis will be proved right. We may continue to rise further but this doesn't mean that we won't crash in the end. At least, that's what my theory of a run-away Bitcoin volatility says

I read the other day how the top 1000 bitcoin holders hold something like 40% of all of the bitcoins in circulation. It just shows how a scenario that you speak of is highly possible. At some point in time they will surely liquidate their bitcoin, it won't even have to be a lot of them but say 100000 bitcoin coming in to the market would surely be enough to see the price fall quite dramatically.