Didn't you think it was weird that Bitcoin was more well known than ever before last year, had more VC investment and is now accepted by tens of thousands of businesses yet the price inexplicably generally trended down the whole year?
Why?
I suggest the reason is volatility.
The majority of businesses immediately sell their Bitcoin for fiat.
"Mr. White says that Coinbase’s list of merchants is continuing to grow at a rate of 10% each month despite bitcoin’s recent price drop. The “vast majority” of them convert their bitcoin into dollars, he says."
http://www.wsj.com/articles/even-bitcoins-fans-prefer-to-keep-cash-1419539916The problem for the price of Bitcoin is that a sale IN Bitcoin equals a sale OF Bitcoin. Imagine if every time you paid in dollars at a shop, the shop didn't keep the dollars and had to immediately sell the dollars for Euro. The Dollar would rapidly devalue. Unfortunately the more people shop with Bitcoin the more selling pressure there is.
When few people accepted Bitcoin the price could rise, because we were all hoarding it. New demand had to chase newly mined coins. Now new demand has to soak up high inflation and all the Bitcoin we spend that businesses are selling for fiat as soon as they get it.
A DAM was in place now the water can get out via businesses. If the businesses held some of the Bitcoin it would make a lake that got bigger and bigger whenever people replenished. But Bitcoin leaks out because businesses don't hold it. So all the replenishing is just refilling a leaking DAM, which wouldn't leak with a stable crypto-currency. The 2014 trend clearly shows that the Dam is leaking and is definitely not growing imo.
I still hold a bit of Bitcoin because if the the financial system experienced problems like wide spread bail-ins there would be a big short term spike, but long term I'm fairly confident non stable crypto-currencies are non-viable on their own and will be replaced by stable crypto-currency options that have unstable crypto-currencies as the backing.
Once those take off alt-coiners will be rich again as businesses can hold the stable option which will help plug the leaky bucket & increase the demand for the unstable one backing it
There are already dollar stable options out there that I believe more businesses will be inclined to hold as they gain adoption.
Dollar stable assets still offer them the advantages of decentralization - their dollar stable asset can't be confiscated, the alt-coin backing it can't be shut down. The collateral/system backing them is open source and auditable on the blockchain 24/7.
I think using a volatile Bitcoin for business is what's causing a lot of the current downtrend & it is set to continue if this cycle of businesses selling BTC immediately for fiat continues as the replenishing will only be refilling a leaky bucket that is also leaking 10% inflation. The 2014 trend shows Bitcoin is losing a lot despite greater investment, development, exposure and utility.
Disclosure: I own BitShares who offer BitUSD. NuBits also offer a dollar stable asset. There are also centralized players with dollar stable offerings CoinoUSD, BitReserve etc. Vitalik & Ethereum are also working on stable crypto-currency too, but that tracks true inflation I think.
What are people's thoughts on the argument?
Bitcoin is currently too volatile for businesses to hold significant amounts of their assets in.
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