Quote from: Alex Beckenham on July 25, 2011, 06:41:47 AM

Quote from: netrin on July 25, 2011, 05:57:10 AM

I understood your post to claim that drug dealers were keeping the price stable. However, after re-reading your post, I can see you were referring to volatility.

What's the difference? Besides that they're opposites of each other.

Price stability (whose opposite is price instability) is close to or nearly 0% inflation, such as the EU's stability pact which "in the pursuit of price stability, it aims to maintain inflation rates below, but close to, 2% over the medium term." If one believes dollars or euros are stable, then a price stable bitcoin exchange rate would be pegged to one of them (for example $14 for ever).

Market volatility (whose opposite is a mythical market stability) refers to the rapid inflation and deflation irrespective of long term trends (although those can be volatile as well). Volatility is essentially the risk of investing in an asset, the deviation from average trends on any scale. (for example 1% deviation from closing price)

It is difficult to imagine a price stable asset with high market volatility. But the converse, such price adjusted controls during hyperinflation or electronics whose prices rapidly deflate but display moderate market volatility (the prices of do not generally deviate rapidly from day to day).

Quote

"Volatility is only a good measure of risk if you feel that being rich then being poor is the same as being poor then rich".

-- Peter Carr