Bitcoin Forum

Or at least different market caps for different levels of stability.

What is your estimate for +-1% variation and +-3% variation. Or what do you think is the most realistic +-% range that we'll see?

Gold is what, 9 trillion? And it's still often volatile. I'm guessing this is purely due to speculation.

100bn $ upwards is the minimum viable stabilising threshold I think
15 to 20x from here

(Note that I have no education and little experience in these things)

Apple seems to vary less than 1% most days and its current market cap is ~550 billion.

Canadian dollars are worth ~2 Trillion US dollars and seems to vary as much as Apple so it seems that market cap is only part of what ads stability.

Would it take governments deciding to hold bitcoin in their reserves for bitcoin's market cap to reach these heights or not? Or is private capital sufficient to get bitcoin to the 100 billion, 500 billion or 2 trillion dollar market caps mentioned?

Even gold with its huge market cap is still relatively volatile. Bitcoin will always be relatively volatile as long as it isn't used as a widespread unit of account.

Fiat is stable because it is being regulated by government.

Bitcoin is regulated by free market. And free market is Chaos.

The main reason why first world countries' currencies are stable is because people plan long term projects in them. Almost nobody plans things in terms of gold or bitcoin. Hence, the volatility and the twitchy nature of the market.

I wouldn't call it "Chaos" .
As for market cap, well... Its rly hard to say, once it becomes mainstream and more and more people start to use it , else when we go to extreme with diff , it should stabilize ...

But again we all know how things can change so fast with bitcoin, its rly hard to predict a future for it.

That's what worries me too. Specifically the fact that gold, despite it's 'large' market cap is still unacceptably volatile to used as a currency.

What is interesting though is that gold was much less volatile when US dollars were backed by gold.

If it gets widespread enough, it will replace fiat which will make it basicly 100% stable. Noone will ever ask: "how much dollars or euro is 1 btc worh"? Answer would be: "What is dollar or euro?"

Hehe. Pretty optimistic post . I dont think we will get there anytime soon . Maybe in like 50 years or so :D

Well of course. IT can burn right now down to 0 because of some unknown bug, or it can liv eon and take over fiat. It's just one of possibilities. What is for sure is that higher it goes, more stable it will get.

Even if it does replace the dollar or euro it will still be compared to other things like gold, oil, other cryptocurrencies. Maybe someone will make a stable crypto backed by gold or something like that if bitcoin is too volatile.

Higher market cap doesn't mean stability. As pointed out by various posters, gold has trillion dollar market cap and it is no where near stable.

As big as gold is, my guess is the bitcoin is currently used as a currency in a greater number of transactions than gold (number of transaction, not value transacted). When a large number of people are using it every day I think that will stabilize it more than market cap. People will just expect their dozen eggs to cost about 200 satoshi when they go to the market. Might be 220 satoshi at Safeway and 199 satoshi at WinCo but that expectation will stabilize it a lot.

No, but there is a correlation of stability with market cap. As it takes more money to move the market the higher you go.

This is true. However it will be exaggerated be the fact as to how concentrated bitcoin holdings are. As the market cap get bigger, large holders of bitcoin (especially early adapters who CPU mined several blocks per day) would have a greater incentive to sell off part of their bitcoin holdings. This would cause large swings in prices.

Yeah, that's true.

And then there is always the threat that Satoshi could come back one day and decide to let loose one million coins on the market :P

I would say 100 Billion dollars would keep the price very stable
The reason is that a movement of 1 billion dollars would not move the price much in relative percentages but perhaps a lot in Fiat terms still.

Kind of a tricky question since mining would still be occurring and it depends on how many Bitcoins still remain in circulation not lost stolen etc.
Due to divisibility.

Trillion of dollars change hand in the forex market and none of the currency look stable. Yearly fluctuation for more than 25% for some currencies.

I don't think market cap has any correlation with stability.

I'd say $1 trillion market cap.

It doesn't matter if they don't "look" stable because they're what we compare Bitcoin's to when we talk about Bitcoin being highly volatile.

So if "trillions of dollars changing hands" means we can have BTC down from 5000% yearly change to 25%, then it would be, by comparable standards, stable.

+1

It won't be. Just as word economy isn't stable... And no one is stabilising it either...

Is it really gold that is volatile being priced in fiat or fiat being volatile when priced in gold?

private capital is easily sufficient to reach about a trillion.


ask around, how many people actually own bitcoin?

If the amount of bitcoin owners increases by 50 times or so, we'll definitely be at a trillion dollar 'market cap'.

Will it be stable? Probably not.

It won't be stable until it's the main currency.

In fact bitcoin may at some point be more stable than USD and EUR and other fiat itself, but of course it would look unstable.

For example if you would compare Bitcoin to Gold i expect that once the 'market cap' of bitcoin is big enough, the Gold/XBT ratio would not change that much anymore. While the USD/Bitcoin ratio will.

I'm not sure if market cap is the only relevant factor for price stability. I think equally or even more important is the main use of bitcoin.

I'd argue that the more bitcoin is used for transactions the less volatile it will be. If bitcoin is primarily seen as a commodity it will have higher volatility than if it's primarily used as a transactional currency. With market capitalization in the trillions and primarily commodity properties it will have gold-like volatility which is still substantial but would not impede usability either.

This is probably one of the reason currency/bitcoin pair will never be stable.

Also, as technology finally hit its limitation on mining, price of bitcoin need to keep rising to justify the amount of hash rate currently being run. How it finally play out remain to being seen.

This is 100% correct. It is not so much market cap that affects stability but total transaction volume, both measured by goods/services to bitcoin and by exchange volume.

Once TX volume picks up (from TX of actual trades involving goods/services) then the price of bitcoin should stabilize.

When it is back by goods and services it will stabilize. One thing that would help would be to decouple it from the dollar, yen, etc. We need so many satoshi or bits compared to a basket of goods and services to get a true value. As acceptance increases this will come.

No, even priced in other commodities, Gold is still volatile (especially on a monthly or yearly basis).

It doesn't matter in what currency or unit of measure something is priced in. If something is volatile it will be in every measure

I would say the opposite. I would say that once the price stabilizes then trade volume would increase as people will be less susceptible to losing money between the time they acquire the bitcoin and the time they spend the bitcoin

When you have more trades, you will have more people buying/selling bitcoin (and higher volume), when you have more volume of bitcoin being traded it will take more money to move the price then when volume is lower

When some country buys another currency for reserves, yes that strengthens the foreign currency.

The only reason to have reserves, is to manipulate (also called stabilize) a local fiat currency. If the fiat currency in question were allowed to float, reserves would not be necessary.

If a country has a trade surplus and nothing to spend the excess currency that is pouring into the country then it will have foreign currency reserves.

That is not enough, the foreign money has to somehow get into the pockets of the government.

Given how mining work for bitcoin, I do not think the price will stable.

It has to keep going up so miners can have "profit" in either profit or transaction fee.

Well, it can still go up and be relatively stable as well.

Bitcoin price was relatively stable during 2012, because of high supply and concentrated trading at MtGox.
Now with lower supply (and more hoarding) and market fragmentation, it's much easier to pump bitcoin.

Do you consider gold stable?

Most governments charge some kind of tariff when goods are imported, these can be paid for with foreign currency. Governments also often have some kind of ownership stake in various industries. 

Not really. But it's a lot more stable than bitcoin and and if bitcoin were ever to become as volatile as gold I would consider that a big step forward.

Gold is a commodity and commodity's do not generally have stable prices, that is why there are futures markets for commoditys - so buyers and sellers can hedge their prices 

Generally speaking if something is rising in price at a rapid rate it will not be considered stable.

Well when you consider it from a small percentage movement instead of a cash value then one can consider it more or less stable.

Gold is still more stable then a lot of 3rd world currencies. Over the long term bitcoin could potentially supplement currencies in the "3rd world" allowing it to reach it's true potential 

Well it could be rising in price relative to the USD but still stable relative to gold and oil. I.e. the USD is going down instead of bitcoin going up.

This would be unusual. The US dollar is a very stable currency and for all intensive purposes will not fall at the rate needed to make bitcoin go up substantially

Yeah, I don't think that it is likely at all. I was just commenting on a hypothetical where the price could be rising and still be considered stable.

The Dollar is simply too stable for this to be a possibility. A change of 1% in the value of the dollar is considered to be extreme. It is unusual for bitcoin to not trade in a range of at least 5% in any given day.

I LOLed.

You just don't get it, do you?  The only reason the dollar appears to be stable is that all other major currencies are pegged to it after a fashion:  When the fed wants to devalue, they coordinate with other central banks, thus avoiding competitive devaluations.  Moreover the major relative moves are very trendy and take much longer than days.

Dollar is not stable. Look at commodity chart for the last 10 years.

And small event such as the FBI auction cause price to go up over 10% should let people know how volatile the price is.

This the dollar has been on a deflationary streak for a long time in terms of purchasing power as well

http://thumbnails-visually.netdna-ssl.com/purchasing-power-of-the-us-dollar-1913-to-2013_517962b78ea3c_w1500.jpg

With reservations for the wealthy elite lol. Real Income Changes
http://realfactbias.blogspot.ca/2012/02/no-dollar-did-not-really-lose-95-of-its.html

http://s1.ibtimes.com/sites/www.ibtimes.com/files/styles/v2_article_large/public/2013/09/11/real-income-growth.jpg

I would say, +-10% yearly and even quarterly fluctuations is stable enough, doesn't have to be 1-3% to call it stable. Currencies on Forex can fluctuate 10% and people are ok with that even though they have immense support from Central banks to give them some pegging.

Besides, if real (not published in stats) yearly inflation of world fiat currencies is 5-10% on average, having 10% fluctuations in Bitcoin is as good as it gets. With that in mind, I would say, it's already reached that point where it can be called stable.

Now that artificial Mt.Gox liquidity is gone, the market has reached more fair valuations, and buyers seem to be in match with sellers recently. If Bitcoin price changes on average 1%/month against USD when calculated at the end of the year, that is stable and good enough for all practical purposes.

A 10% change in the market price of bitcoin is not very big by bitcoin standards. It has seen price swings of 50% or more in both directions in one day.

A good reason why is it not a good payment system. Hard to set consumer protection policy if the price can change this much.

I'd say above 1 trillion to be "stable".

That is true today, but the number and size of these large price swings have decreased over time that the market for bitcoin has existed.

Stability doesn't have anything to do with market cap, but the distribution of coins.

If the market cap is 1 trillion, but there are still whales with considerable amount of btc then they will be able to crash the markets.

I wouldn't say it doesn't have anything to do with market cap, but that both things are issues related to stability. The larger the market cap the more money it's going to take to move the market on a day to day basis. But yes, someone who holds a large percentage of coins will have the ability to crash the market in most cases unless the buy support is incredibly large.

But when the market cap is higher, people who have the ability to manipulate the price will have less of an incentive to do so as they have more to lose. Also people who have existing amounts of bitcoin would have less incentives to try to crash the price as they now have a lot more to lose.

Right. Unless they receive some non public information or early public information that might want to cause them to sell all their coins at once.  Like some sort of government crackdown or major technical issue. If they feel that they would lose more by holding then that's one situation where they might have more to gain by unloading all their coins at once.

It would not just be from non-public information, it would be any potential negative information that would cause people to wish to sell bitcoin. The thing is that by the time bitcoin would get to be at a level that is "stable" the vast majority of these issues would likely have worked themselves out.

Yeah, hopefully. But there is always going to be some risk just as there is in any technology or any endeavour for that matter.

As the market cap increases, the large holders of bitcoin who were early adopters will have a greater chance of selling some of their holdings, making it so after the sale they would be able to have less of an impact on the price.

Bitcoin will need to be more diversified in terms of who holds large amounts of bitcoin. Until the distribution of bitcoin is more even, or less top heavy, bitcoin will be a very volatile asset to own. 

Bitcoin will be stable when distributed to people who decide to hold them for other reasons than speculation. For instance a business holding some amount to support the day to day payments.

I agree that speculators need to be holding less bitcoin for it to have a stable price, but it also needs to be more evenly distributed. Another catalyst that would cause bitcoin's price to be more stable would be more trade taking place in bitcoin and a higher overall market cap.

I agree this is purely speculation so why not post the thread in the speculation section so it gets the proper amount of attention it deserves?

Anyway I guess a market cap approaching 2 billion for some stability.

I assume that was a typo and you meant 2 trillion, right?

Probably as the market cap right now is over 8 billion.

It's not about market cap.  When enough people have obligations denominated in BTC, they will be forced buyers.  That will create a price support which prevents the unfettered momentum trading from reaching absurd extremes.

Yeah that was a fail on my part.  Good catch, I'm thinking I meant at least 200 billion dollars and don't know what was going threw my head at the time I posted that.  My main point was we need some real growth and big money to enter the scene to expect any long term stability.

Bitcoin price will never be stable if price in fiat. The problem is paper money is too volatile.

Thats the spirit! Hahaha good one.

That would a good quote actually nice one  ;)

So when will the price be stable never guys paper money is to volatile ^_^.

The velocity of money, rather than market cap, would determine price stability.  :)

It's really hard to predict but when the market cap will be as high as the Apple one,
then the times should be mature enough to have a stable price.

We shouldn't really be comparing the value of a currency to the market capitalization of a company.

The deeper the order books, the more stable a currency will be.

I agree, it is more how liquid the market is, instead of how high of the total value BTC has.

Well that is also true guess it would depend how much money is around a price range to make it move up or downward that would make a currency or Bitcoin stable, but by market cap is the question ^_^.

True, but market cap can a coin make more instable!

Think about a highly valued coin with very thin market books. If someone wants to cashout a chunk, the market will tank.

The same cap with highly liquid markets would eat up that sell in seconds!

I agree. The market cap of a company is a reflection of what the market thinks it will make in the future (future earnings) while the market cap of a currency is the reflection of the potential value and adoption of the currency.