Bitcoin Forum

We read all the time that Bitcoin cannot be a valid currency because it is too volatile. The argument is that people won't spend bitcoins when their fiat value spikes. But wouldn't that only be true if everyone knew exactly how high the price was going to go and when it was going to get there? And in a volatile environment, isn't each transaction a zero-sum game? Would a decisive number of people consistently find such risk objectionable?

Does bitcoin's volatility hamper the dark web? Has anyone seen headlines like "Dark Web Sales Fall Flat as Bitcoin Skyrockets"? Are dark marketeers so careless of their money? And has anyone ever heard experts declare that stocks' volatility in effect makes the money that purchased them equally volatile --  although that is exactly what such volatility does?  Do people hold off using a shopping coupon in hopes that next week's Sunday paper will bring a better deal?

Volatility is a strawman. Merchants will adjust their prices and people who need a good or service will use whatever currency is the most practical or convenient for them at a given moment. Ultimately we want what we want now, and tomorrow be damned.

Volatility of bitcoin price is a serious business challenge. Even though bitcoin shows good promise, but in cash rich business like general stores and fast moving consumer goods business, the volatility throws a significant profitability challenge. Unless we find a solution to immediately settle the funds received in bitcoin, it will remain as a major roadblock for bitcoin to be accepted as a normal currency. Let me explain why,

Day 1:
Bitcoin price: $10,000
Product "A" cost: $100 or 0.01 btc
Seller sold 2 units of "A" and received 0.02 btc.

Day 2:
Bitcoin price: $12,000
Product "A" cost: $100 or 0.0084
Seller sold 5 units of "A" product and received 0.042

Day 3:
Bitcoin price: $14200
Product "A" cost: $100 or 0.0070
Seller sold 3 units of "A" product and received 0.021

So on day 3, the seller should hold (0.02+0.042+0.021) = 0.083 bitcoin for selling 10 units of "A" product whose dollar value in fiat is $1,000. TIll day 3, bitcoin price was increasing and the seller was receiving less amounts of bitcoins for the same value in dollar. Imagine, the bitcoin price crashed on day 4 and came down to $9,500. Lets calculate again,

Day 4:
Bitcoin price: $9,500
Bitcoin holding: 0.083
Dollar value: (0.083 X $9500) = $788.5

So on day 4, the seller is actually making a loss of $211.5 for the $1000 product. So unless that seller is really optimistic about bitcoin, he won't favor it to be used as a currency in his store. Either he would need a service which will help him to settle every bitcoin trade immediately using an intermediary or simple don't accept it.

Probably a big company can handle such losses, but a small trader will not be able to handle this where every penny counts. That's the business challenge I am referring to and it is a major roadblock for bitcoin to be accepted as a mainstream currency. 

Yes it is too volatile. Imagine prices having to change every second on every trade portal like Amazon. Moreover, if it does not solve the problem of the high fees, it is unusable as a currency also for this reason.

For me the whole crypto thing is garbage, i just use it because people want it.

I see your point of course, but to get some perspective, in your reply change Amazon to E-trade and currency to store of value.

Exactly so. May we infer that you are a merchant?

Coinbase does offer an instantaneous-conversion service for businesses (although they probably charge well for it). But you make a perfectly valid point. Yet in that scenario it is at least possible that for the merchant in question, the bitcoin sales were in addition to what he would have sold anyway. In this early-adapter phase, it is certainly a possibility. But again, tomorrow those "losses" could become gains. There is no way of telling. In the end it comes down to the cost of instantaneous conversion vs a transient bookkeeping loss that might turn into a very real long-term gain. I think a Bitcoin sticker in the window would at least do no harm.

Yes indeed true bitcoin is really too volatile, But in my opinion it is common for bitcoin to fluctuate. And many bitcoin factor is very fluctuate one of them such as:
1. Situations where more bitcoin traders than bitcoin users.
        It can be understood that being a bitcoin user is a bit difficult because the merchant receiving bitcoin is still relatively small.
2. News spread globally.
        Ordinary people who do not understand well about bitcoin become very affected by various positive and negative news spread in the media.
3. Bitcoin hacked or carried away by other parties.
        Investors and new bitcoin users jump into the world of cryptocurrency will be very frightened if they hear if any party loses bitcoin for being hacked.

And many more things that affect the bitcoin is very volatile.

Volatility is an impediment to use as a currency right now, but it won't be in the future. I think high fees are the biggest impediment to adoption, right now and in the future.

That's right. Buyers and sellers alike will take its volatility in stride.

It is a double edged sword i think , the volatility attracted and still attract a lot of new people to the space. But is is nearly impossible to pay with it without immediately swapping it for usd. So there is the biggest challenge for the bitcoin team at the moment. Maybe a system like some other coins have where spending coins has an advantage opposed to just holding it.

volatility is not the issue.

for years merchants accepted bitcoin because they used bitpay and coinbase that converted it to fiat at receipt so when a shopping cart showed $100.. the cart converted it to a bitcoin amount to display to customers and then the cart service gave the merchant $100, within a allotted time.. thus never a problem

the math example by avikz is wrong due to avikz showing a silly example where the seller waited until the price dropped before converting.
firstly
merchants don't wait
secondly
if your going to wait your not going to finally give in and sell on the worse day of the week, so that example is wrong.
funnily if the seller exchanged on day 3 - $14200 he would have been $178.60 UP..
but yea aviks selective picked an obscene scenario, to make an obscene point

the problem is not price volatility.. the problem is the cost to do the transaction (the tx fee)
also bitcoin is not good for real world brick and mortar merchants with checkout lines, where it takes 10mins+ to guarantee the payment is not reversible.
its like watching an old lady infront of you counting out pennies for 10 minutes, resulting in bad customer service and complaints by the other customers in the queue waiting

bitcoin had a very niche market for online products and services that needed to be delivered and as such allowed time for confirmation before dispatching products.
but it did not work well for small items of under $100 due to the fact that the TX fee was growing to a few dollars just to make a trade.

which could have been avoided with simple code in the form of a tx priority fee formula.. but instead devs just went ahead, lets fees spiral out of control to then advertise their banking2.0 second layer services.

Firstly, Bitcoin is not a currency as we would like to believe, for now it is a make believe currency by crypto lovers. This accounts for its low volume in global trade.
Secondly, if Bitcoin were to be a currency it won't be as volatile as we're seeing. It's volatility is in relation to fiat. Bitcoin as a currency would not need fiat equivalent to be used as a means for transactions. 
E.g 1BTC = 1 Toyota Camry,
1000Satoshi = 1Pizza
Fiat equivalent wouldn't have mattered.

Presently, Bitcoin serves speculative purposes hence its volatility. Maybe things would be different tomorrow when Bitcoin (or it's derivative) becomes accepted as the legal tender.

I think volatility also affects people willingness to spend their bitcoins.

People hold bitcoins in hope that the value will increase.

For example:
If you think 1 BTC will be worth $1 million in the future, would you use 1 BTC to buy a car that’s priced at 10k today?

Yes, Sad to say. Bitcoin's high volatility rate is one of the huge drawbacks of this amazing currency. So much that it couldn't be used as a currency because any country that would declare to use bitcoin as their respective national currency is sure to fall. Let's just hope that one day bitcoin's value would be stable so that it would be of greater use.

Bitcoin can only be a useful currency if all people are using bitcoin in which case there is no need to convert it to fiat which is the reason why we can say that bitcoin is volatile. If you are buying something in the grocery and the price is in bitcoin, you pay in bitcoin and your change is in bitcoin and there is no need to convert to fiat then the profit and loss of your money would be easily computed. It is not possible now because all are converted to fiat since not all businesses are involved with bitcoin yet so this is the hindrance why bitcoin cannot be totally use yet as a currency because you might end up losing more if the bitcoin's value drop thousands of dollars the following day.

If you have $10K today, would you use it to buy a bitcoin or a car? You have no idea how far in the future that million dollar bitcoin might be, but you definitely know whether you need a car now. And if you start to save up another $10K by working a better job that your new car takes you to, bitcoin might tank any number of times, giving you buying opportunities. Ultimately, you have to balance risks and opportunities.

really good explanation for bitcoin  volatility problem i my self couldn't of better unfortunately i don't smerit anymore  ;) but do you think if bitcoin and other crypto assets  got a world wide  acceptance as a form of payment will make it reach the point of stabilization >? that's my opinion which i hope iam right about or you could maybe refer to a better solution on the volatility  of crypto market    

Yes,it is too volatile to be used as a currency.The price of bitcoin was around $20K  before some weeks but for now it is around $8000 so the price decreased more than a half so if a merchant accepts bitcoin then he will face srious losses when condition like this.BUt we are still eraly at the using of crypto currency in future the price will get stabilize at some point and we can use it as a currency.

It is volatile now, but it may stabilize in the future. Who knows what will happen? But I think its volatility doesn't affect its potential uses.

iam sorry for being noisy but how can explain when a company like Microsoft stopped accepting bitcoin as a form of payment they did specify the reason is the volatility  of bitcoin but in my opinion volatility  is an obstacle for bitcoin getting more accepted as a form of payment and also tx fee but this one come in second  

Microsoft is accepting bitcoin again: http://fortune.com/2018/01/10/microsoft-bitcoin-temporary-halt/ (http://fortune.com/2018/01/10/microsoft-bitcoin-temporary-halt/).

haven't read that one exactly but it is nonsense.
the only thing that volatility or better said increasing price of bitcoin creates is less incentive for some people to spend their bitcoin. and it is not everyone. the amount of money that has been going to merchants through bitcoin is the living proof. you can check bitpay stats in the past few years and see that for yourself.

the usage of bitcoin in dark markets has dropped in the past and continues dropping because people start to realize bitcoin has never been anonymous. and now coins with real anonymity are more popular!

more than anything I think transaction speed will always keep bitcoin from being a useful currency.  It will become (or already has), become a store a value.  if bitcoin keeps up with it's trends, bucking from 20k to 7k in a month, nobody can take it seriously as a currency.  why would you use it to purchase something that can buy a new car one week to a mediocre used car a month later.  

Yes, the price of bitcoin is not stable, which can be seen from the price of bitcoin in the past month.
Bitcoin has fallen from $20, 000 in January to $8, 000 today, a big move.
But I think it might be normal for bitcoin, because there are many factors that affect the price of bitcoin.
For example, when there is bad news about bitcoin, the price of bitcoin falls, which has been well received in the past month.
When bitcoin is stolen, the price of bitcoin fluctuates wildly.

Currently, yes.

You wouldn't. But you don't know what it will buy a month later. Maybe a new car or no car at all. In the end you have to decide what you need now and what you don't need. If a bitcoin will facilitate a purchase that you need now, you will use it. Its volatility is irrelevant. Maybe you don't need a car. Maybe you need to invest in stocks through your 401(k) more than you need to hodl bitcoins. So you buy stocks, which are volatile, with a bitcoin, which is also volatile. See what I mean?

Thats right, bitcoin is always volatile like that, and in fact many people prefer to sell bitcoin instead of having to keep it

Yep. And this week many people preferred to sell their stocks instead of having to keep them!

It can’t be because it wasn’t supposed to be as a currency that the government may controlled. I don’t even think it this is needed to be mainstream on some point, it is a revolutionary currency that the people or the masses must be the one who benefited and not the elite. So I don’t care for that, as a matter of fact I only care for this community to grow with or without those corrupt public officials and they’re biases.

There are different kinds of volatility. Consider Venezuela. Its currency is certainly volatile -- but volatile in the same direction --down. Probably that nation will never declare bitcoin as its national currency, but certainly plenty of its citizens are using it as such. Bitcoin's volatility is unlikely to send them back into the arms of the Venezuelan bolivar. Indeed since every bitcoin transaction is a zero-sum game (one winner, one loser as far as daily gain/loss) they are likely to greater prefer it. As least with bitcoin they have a 50/50 chance of finding themselves with a momentarily practical store of value and a unit of exchange.

Your answer has earned you $1,000. Paypal or bitcoin?

 I think it's only useful as a currency in limited number of cases for example:- the ones involving big international transactions , instead of paying heave taxes and fee you could do that transaction through Bitcoins.
It is true that Bitcoins is too volatile to be used in place of normal currency but in my opinion it was made to be used as an investment not as a currency.
Thus Currency thing is an additional benefit.. not something that's it's supposed to function as.

If a country has to use it as a currency then it needs to be stable like your country's currency which is not the case with the bitcoin. So potentially it cannot become a currency of any country if this not regulated or does not become fully stable like the other national currency.

Yes it is too volatile to be thought strictly as a currency.  I look at it more as an asset, a huge value asset.  Some people liken it to gold.  Just like you wouldn’t use gold to buy everyday items, you probably wouldn’t want to use Bitcoin to buy everyday items.  I think eventually some other crypto will become the USA standard for everyday transactions.  

Yes, the bitcoin as one of the most popular currency in the market now, its price is very unstable, he in a very short period of time the price can happen very big change
 In the past one month, the currency fell by $10000, so when are you going to investment COINS, you need careful consideration

Volatility isn’t really a problem because companies like BitPay remove the risk.

From BitPay’s website:


That’s the reason I’ve said for a very long time that there are no businesses really accepting bitcoin. Businesses accept fiat just as they always have, BitPay accepts bitcoin.

Imagine the hassle of a store always changing the price of their product if you will pay in bitcoin since its value changes all the time or what if the bitcoin was payed at high value then suddenly the value go down in large amount. It is like you just sold a product at loss. Well still many store online has now accepting bitcoin as payment method perhaps they have their own strategy on how to manage sales through bitcoin. As for the situation right now the price movement of bitcoin are at small difference. But if large scale of decrease happens again then it might be very hard for most of stores to remedy their loss.

Nobody can say for sure what will happen with the volatility of bitcoin in the future, when its price will increase significantly. Perhaps the range of volatility, on the contrary, will increase, as this possibility will also be greater. This is roughly the same as the bitcoin course and the range of its correction. We see that the higher the price of bitcoin, the deeper its correction.

Bitcoin clearly demonstrates its unpredictability. Then he sets another record, taking off, and less than a day later his course suddenly drops sharply.
Bitcoin has rather high volatility; The high amplitude of fluctuations in the cost graph in equivalent to the classical currencies. This indicates the instability or even the absence of a fundamental basis for the value of the crypto currency. Other trading instruments, be it currency or stocks, have a real material base. Equity is the equivalent of the market value of an operating business, classical currencies have a course that depends to a large extent on the policy of the state and the policy of central banks regulating monetary circulation and controlling the risks for users in cash. At bitcoin, both the rapid growth of its value, and the rapid decline depend on the balance of supply and demand. Predict the future - what will be the course of bitcoin tomorrow, a week, a month - just unrealistic
Accordingly, while people have agreed that this means of exchange, bitcoin is. But if global economic actors put it in doubt, it will cease to be such a means

For now, bitcoin is still hard to come by as a currency.
Because of the volatility of bitcoin, and the slow transfer rate of bitcoin, the transfer fee is very high, so it is not appropriate to use it as a currency.

For the past decades, the financial aspect of the world has been doing great even without bitcoin. When bitcoin got introduced to some countries, the fiat currencies were also in good condition. And even when bitcoin disappears in the future, countries will still be financially stable. Bitcoin is just a cryptocurrency which can be an alternative to investment and transaction of fees. Just like the previous years when we had no idea about it, when it is gone, the financial world still keeps going.

Thank you! The best solution to it, is to have a vendor like Coinbase or Bitpay who will instantly settle bitcoin in to dollar after each sale. So the store owner will not have to bother about the price volatility. What ever the price he has used to sell a product, the amount will be instantly convert to the dollar value. However, here is another challenge about the high fees. Bitcoin transaction is costly nowadays. Unless this big vendors like Coinbase or Bitpay adopts segwit, the fees will never go down. So if the transaction fees and the vendor fees both can be lowered and can be kept within 2%-5% of the transaction value, it can be a viable solution for the small business owners.

perhaps - but bigger problem is too many scams out there.  sadly regulators need to step in.  weak exchanges and fake documents undermines legitimacy.  every day a new one pops up.  example:
aladin coin scam
http://behindmlm.com/mlm-reviews/aladincoin-review-aic-ponzi-points-scheme/#comment-394758

Yes volatility is one of the problems to bitcoin adoption.  Thats largely because it doesnt currently have much use beyond exchange trading, so the value is determined by traders and their bots, rather than a wider economic system.  Its chicken and egg, its not accepted because its too volatile, it volatile because its not accepted.  

Acceptance with BitPay and similar are no solution, because the vendor does not keep the currency, its converted immediately to other local currency.  i.e. it goes straight to the exchanges.  In fact they are part of the problem because cheerleaders say Bitcoin is being accepted when it is not really.  When a company accepts actual bitcoin to their wallet, then uses that to pay their suppliers, thats when the real economic system begins to form.

I don't think so. If people all over the world will use Bitcoin as a useful currency, its price will most likely stabilized. It will solve the volatility problem. The current price right now is based on supply and demand and as we all know, the demand for Bitcoin now is not that high. If it will be accepted worldwide, the demand will most likely increase and the price might stabilized.

In general I think that bitcoin is a storage of wealth, not a currency.
And for an asset being volatile is not such a big problem then it is for a currency.
Then I still see the high fees and the long tranaction times as a problem. If the lightning network will be a solution for that needs to be seen.

Bitcoin is not quite the same in that it doesn't pay dividends, but the key point is the same: potential. People believe that there is a chance it becomes useful as a currency, and by that time the price will have already risen by a lot, so they buy bitcoins hoping that they will increase in value.

I think we're still right at the start of the journey for Bitcoin. In reality, most fiat currencies have been around for a very long time now and have gone through their growing pains and got to maturation.

As adoption grows and more people start buying and transacting with Bitcoin, it should theoretically become more stable. Likewise, when the percentage of un-owned Bitcoins falls, growth starts to taper off, and people aren't expecting massive gains we should also see more stability.

All the alt coins are volatile too. We should be neutral to said Bitcoin will be used like a currency but in digital form. I believe Bitcoin will flourish and time for crypto world has still long way to go....

I will just single out one area that you mentioned which is volatility. The volatility is one factor that bitcoin is known with, it can sweep in and out. This is one reason that investors would not see bitcoin as a store house or asset. However , the reason that is that way is because there are no regulation yet. When the government come in, there will be so many restrictions in cryptocurrency, from dumping, how much minimum and maximum to invest, name them.... Those regulations would definitely stabilize the market which will be good  because it will bring in the skeptics in and the market cap will seriously increase.

As an online marketer who sells some services in Bitcoins, I agree to this. For instance, I have a product that I offer for $25. One of the buyer did not had PayPal so he asked me if I will accept PayPal. Eventually, he did not order because he wanted me to cover the fees involved. There is not that margin in all services and products.

Bitcoin is too volatile to be a useful currency, but for now, one day this volatility will stop

Your looking at bitcoin as an asset in that example. Would you say the same thing if your using bitcoin as a currency.

Unfortunately, yes. It is one of the major drawbacks of the said cryptocurrency. The high volatility rate itself hinders bitcoin to develop as a currency and contains it as an asset for profit. Let's hope that this instability of bitcoin would someday be solved so that we could see a bright future for the bitcoin world.

Prices for bitcoins are really unstable and strongly dependent on supply and demand. This leads to self-regulation bitcoins, which will depend on users, so bitcoins will not be used.

Are those new coins with real anonymity more stable than bitcoin?

It is likely that many (and eventually all) stocks and bonds will be controlled by blockchain-based ethereum-style smart contracts -- sort of like how Augur's Reputation tokens are controlled by such a contract on the Ethereum blockchain. You can transfer, buy, or sell the Augur tokens as freely as you want, but they remain under the control of the original contract. Such contract-controlled stocks and bonds might be usable as currency. But would their volatility alone prevent such use? No! In fact such use could increasingly be the market for such stocks and bonds -- a decentralized worldwide stock/bond/futures market. You stop at a Quickie Mart for some beer and cigarettes. You slide your card, and some fraction of the present or future value of your share or bond or its future dividend or interest payment is deducted. Depending on economic conditions, the merchant's own contract will either instantly trade the share/bond/dividend/interest for cash or credit or bitcoins or ethereums or whatever. Or maybe the contract will keep the payment for the moment.

I don't see why this arrangement wouldn't work. The volatility is just another variable, like the futures price of hops and tobacco.

I don't really agree with this point of view. I would accept it, if you mentioned high fees, but although price volatility might seem to be a problem, and it would be if the change was to rapid, I think that most merchants could just sell bitcoins as they get them. So they would just need a script to keep the prices accurate, regarding the latest changes, and then convert the coin back to fiat as soon as they got them. I'm sure there are many services from the major wallets, that would provide that service to merchants.

For instance, when you deposit bitcoin in neteller, you will get an exchange rate, and you will get fiat in your account. That service, that in this case is provided by bitpay if I'm not mistaken, could easily be used by any merchants, so the only problem I see are the fees and not the volatility.

Of course that right now, not even the fees seem to be a real problem, because segwit adoption is increasing, and LN is being developed at good pace, so things will get even better.