Quote from: Omega Weapon on January 29, 2018, 10:52:03 PM

Quote from: kryptorian on January 29, 2018, 09:19:49 PM

I want to share my opinion on the question of Bitcoin's high volatility, but it is just an opinion so please be patient with me. I've read a few topics here and there where people ask about Bitcoin's volatility, its causes, and whether it is going to end one day if ever. Below is my take on the matter.

People want to know when we will reach the state of more or less stable cryptocurrencies and whether it is possible at all. I think that without wide adoption in the real sector the volatility of cryptocurrencies is not going anywhere. The reason is quite simple, and you don't need to be an Einstein of economics to understand that. For example, fiat currencies have wide application in the real world. You can buy food, water, clothes, whatever with them. In short, you always know how much 1 or 1,000 dollars can buy, and this sets the reference point for the dollars worth of things. And this is the main reason why volatility of major fiat currencies is constrained. Let's take the dollar as an example here. If the dollar becomes undervalued in respect to goods which can be bought with it, people start exchanging other currencies for it, and the dollar value rises. On the other hand, if the dollar is overvalued in respect to the same basket of goods, people start selling it for other currencies, and the dollar value falls. In both of these cases, the effect is diminished volatility.

With mostly speculative assets like cryptocurrencies, it doesn't work like this because there is no such point of reference. Therefore, there is no limit for volatility either. The bottom line is that if we want lower volatility of cryptocurrencies, we need wider application of them in the real world. We need them to be extensively used in commerce as a means of exchange for goods and services, not as a vehicle for speculation.

Wider applications for cryptocurrency comes with more money and that comes with more volatility as well, volatility is not going to subside until we reach a point in which the cryptocurrencies market begin to move a significant amount of the wealth of the world, that will make very difficult for banks and governments to move the price that much but even then volatility will be greater than in other markets.

I think you are right. There would have to be much more real world application before the volatility dies down. And before there is more real world applications there will be more volatility.