Less Volatility Is Needed?

[otunayode]

Volatility is what make us money. Volatility is attracting value investor. And as bitcoin grow we can allow more development while less volatility. Bitcoin Rocks

[d5000]

My stance on this topic is: We should seek ways to reduce volatility, but we won't completely erradicate it because of Bitcoin's inherent inflexibility to demand fluctuations.

Spot on. This is exactly what we need for the bitcoin price to stabilize, and there is really no other way than a central interventionist bank which none of us bitcoiners want, nor is it possible to build on bitcoin.

I partly disagree. Bitcoin holders have many possibilities to intervene in Bitcoin's price (see below). However, the deterministic supply scheme that governs Bitcoin since Satoshi installed it makes impossible a real "peg" to a currency or commodity, because it would never work to totally equilibrate the (real) demand fluctuations.

But what can be done is to try to limit "irrational" volatility. That is, basically, panic selling and FOMO buying. Here I have often proposed a system where merchants that sell goods and services for Bitcoin could opt to back the Bitcoin price for a day or a couple of days. This would be a win-win system because if their clients can get a discount, the merchants' sales would increase - in a crash, their losses would be outweighed very probably by a drastic sales increase so they benefit especially if they sell goods with low marginal costs.

But as long as most of the Bitcoin users are in as "investors" and want to ride a bullish wave, then "use as a currency" will be marginal and such ideas will have low support (I agree with @pooya87 here).

I'd let it do its own thing and just ride the rough patches out for now. Sooner or later, people will realize the actual usefulness of bitcoin for global instant transactions, and merchants will be starting to accept BTC directly instead of accepting bitcoin as simply a payment gateway for fiat.

Here you're contradicting yourself a bit: If Bitcoin is only useful for "instant transactions" and volatility should be "normal", why should merchants then accept it without fiat gateways? Who would hold the bag? That only makes sense for merchants if there is a kind of "volatility-reducing" plan behind it, like I outlined one above.

[sicparvismagna]

In my opinion volatility is a part of the financial industries, price changes everywhere in the market business are not stable. Consumers are findings way which they can gain and benefit more, some business closes some rises. Which is why we take risks investment we make it is a part of the decision you have to make acceptance and analysis.

[iamTom123]

But what can be done is to try to limit "irrational" volatility. That is, basically, panic selling and FOMO buying. Here I have often proposed a system where merchants that sell goods and services for Bitcoin could opt to back the Bitcoin price for a day or a couple of days. This would be a win-win system because if their clients can get a discount, the merchants' sales would increase - in a crash, their losses would be outweighed very probably by a drastic sales increase so they benefit especially if they sell goods with low marginal costs. But as long as most of the Bitcoin users are in as "investors" and want to ride a bullish wave, then "use as a currency" will be marginal and such ideas will have low support.

I think this has become a cycle. There are many who are getting into Bitcoin because it can suddenly surge in value making its volatility so high which in turn make it more attractive to investing type of people. Volatility is a part of the many reasons why Bitcoin caught the attention of the many and can be the same reason why many merchants are not yet accepting Bitcoin as one of the modes of payment.

I have been saying this many times that there should be a way for merchants to get protected from its volatility so we can all promote Bitcoin to them. Correct me if am wrong but there seems to be ways now for merchants to accept Bitcoin and not to worry more on its volatility.

There should be more and more people and businesses that must accept Bitcoin as form of payment so we can reach the mainstream much faster. An infrastructure must be provided for them so they can be encouraged to be a part of the Bitcoin movement. 

[d5000]

I think this has become a cycle. There are many who are getting into Bitcoin because it can suddenly surge in value making its volatility so high which in turn make it more attractive to investing type of people. Volatility is a part of the many reasons why Bitcoin caught the attention of the many and can be the same reason why many merchants are not yet accepting Bitcoin as one of the modes of payment.

Yep, true. Definitively a dilemma. The idea I outlined above ("merchants backing Bitcoin") would provide a solution, but it would need massive adoption until it has the desired effect on volatility. So it's a chicken-and-egg problem and I'm still thinking about ways to solve it

I have been saying this many times that there should be a way for merchants to get protected from its volatility so we can all promote Bitcoin to them. Correct me if am wrong but there seems to be ways now for merchants to accept Bitcoin and not to worry more on its volatility.

For now, the basic "volatility protection system" are obviously Bitpay-like payment processors, but they're centralized and not very "bitcoinic" (ideologically-wise).

Another way I have read somewhere is a contract-for-difference which the merchant could enter with another party, for example, a Bitcoin trader. The merchant would pay the speculator an "interest" rate, while the Bitcoin trader would guarantee a minimum exchange rate to the merchant. Essentially that would be pretty similar to Bitshares' BitUSD. To do this "decentrally" on a blockchain (without a "centralized" provider like a bank) however needs a pretty powerful smart contract language like Ethereum's, and the interest rate would probably be pretty high because the trader would have to offer a high collateral in the case a crash happens. So BitPay-like centralized services very likely would be less expensive.

[poldanmig]

Bitcoin hasn't spread evenly to many people around the world, and this's why most bitcoin holders still make it a commodity. But later, I also realized that the volatility bitcoin will decrease so its status can be like fiat.

[xFiber]

Less volatility will come with time. Please keep in mind that that this market is still in it's infancy so with time more money will start flowing in that will naturally diminish the volatility.

[Karpeles]

How could low volatility be imposed?
Only by external forces, that is contrary to free market and to Bitcoin, and would kill it.

Or what is the alternative?

[bryant.coleman]

Volatility is what make us money. Volatility is attracting value investor. And as bitcoin grow we can allow more development while less volatility. Bitcoin Rocks

Volatility will bring you money only if you are extremely lucky. Trading may bring you profits 80% of the time, and loss the remaining 20% of the time. But the problem is that the losses will always be heavier than the profits. So even if you are incurring a loss after four successive profitable trades, all of your returns will be wiped out.

[slackcryptoz]

Less volatility will come with time. Please keep in mind that that this market is still in it's infancy so with time more money will start flowing in that will naturally diminish the volatility.

I don't find the volatility a major concern, because without this we won't get the opportunity to earn. Though it's in the infancy stage the growth is much bigger than that happened with some sort of investment portfolios. Based on the fact I don't expect such low volatility or a stable price.

[taktik]

Less volatility will come with time. Please keep in mind that that this market is still in it's infancy so with time more money will start flowing in that will naturally diminish the volatility.

I don't find the volatility a major concern, because without this we won't get the opportunity to earn. Though it's in the infancy stage the growth is much bigger than that happened with some sort of investment portfolios. Based on the fact I don't expect such low volatility or a stable price.

that's why you should not expect from Bitcoin really. You will become a currency for a person's daily life. Due to the fact that Bitcoin can be quite unstable, this role can not be assigned to it.

[RodeoX]

But here is the problem with that.
Less volatility is achieved by forcing people to use their money the way you want it used. The New York stock exchange was as volatile as bitcoin until it was managed. Now it is controlled to the point of being gamed.
If you want to end the volatility just hard fork to a coin controlled by the federal reserve. They can decide when you will sell and buy, how much, where you can spend. They could set a value for bitcoin that is stable. That way you won't make any mistakes with your money. Such as getting rich without permission.

[djsugar]

Of course, Bitcoin needs to be stable to have a better use as a currency and international medium of exchange. For the growth of economy, we need a stable currency. We can't trade using a volatile currency which might decrease to half of its value the other day. Economy won't sustain that way. Bitcoin is less likely to become that stable in near future. Because of limited cap, supply will remain limited whereas with time demand will increase. Price will stay in appreciation but as it is speculative asset, there are always some factors which can bring a dump and hence volatility will remain unless the user base expands enough.

[d5000]

How could low volatility be imposed?
Only by external forces, that is contrary to free market and to Bitcoin, and would kill it.

"Contrary to the free market" would be a single, central "external force" (like a central bank).

But there could be many, decentrally operating forces that control volatility, and that would not be against the "free market". At least much less against it than mega-whales manipulating the price at their will

I have already linked to a possible solution above. Another one is simply to increase the percentage of traders that use a "rebalancing" or "contrarian" strategy, like outlined here. A open source, easy to use bot (with a GUI?) that does rebalancing would be a first step in this direction.

I know volatility is always good if the price curve points in the right direction But at the long term, Bitcoin can gain much more ground (use cases etc.) if volatility is significantly lower than now. The goal should be that the probability to run into a crash of more than 10% in 24 hours approaches <1%, and a 5% crash, let's say, less than 2-3%.

[Lumada]

How could low volatility be imposed?
Only by external forces, that is contrary to free market and to Bitcoin, and would kill it.

"Contrary to the free market" would be a single, central "external force" (like a central bank).

But there could be many, decentrally operating forces that control volatility, and that would not be against the "free market". At least much less against it than mega-whales manipulating the price at their will

I have already linked to a possible solution above. Another one is simply to increase the percentage of traders that use a "rebalancing" or "contrarian" strategy, like outlined here. A open source, easy to use bot (with a GUI?) that does rebalancing would be a first step in this direction.

I know volatility is always good if the price curve points in the right direction But at the long term, Bitcoin can gain much more ground (use cases etc.) if volatility is significantly lower than now. The goal should be that the probability to run into a crash of more than 10% in 24 hours approaches <1%, and a 5% crash, let's say, less than 2-3%.

We just need to go with the flow of the market, when we think that we will lose on it then better wait a little while,hold on to that coins until everything seems fine. In volatility we xan earn we just need to know when it's the time for our coins.

[d5000]

We just need to go with the flow of the market, when we think that we will lose on it then better wait a little while,hold on to that coins until everything seems fine. In volatility we xan earn we just need to know when it's the time for our coins.

That is the typical "trader's point of view". Traders think they can outperform the market.
You even could have luck for some longer time frame, but sometimes you lose ... and often, you lose badly.

One of my objections to this point of view (and to the general concept that "Bitcoin's volatility is fine") can be resumed in the following few lines:

- Bitcoin holders think that Bitcoin will, in the future, conquer the world and get mass adoption. Only that view is justifying the current price and market cap.
- But while Bitcoin is volatile, it can only get adoption as a speculative asset (and for some minuscule use cases like instant remittances, but never really "as a currency")
- And finally, while Bitcoin is a speculative asset, it will be volatile, because every now and then people will massively "take profits", what leads to our "beloved" crashes

If Bitcoin were less volatile, then there is at least a chance it could be used "as a currency" in some moment.

[Vaskiy]

How could low volatility be imposed?
Only by external forces, that is contrary to free market and to Bitcoin, and would kill it.

"Contrary to the free market" would be a single, central "external force" (like a central bank).

But there could be many, decentrally operating forces that control volatility, and that would not be against the "free market". At least much less against it than mega-whales manipulating the price at their will

I have already linked to a possible solution above. Another one is simply to increase the percentage of traders that use a "rebalancing" or "contrarian" strategy, like outlined here. A open source, easy to use bot (with a GUI?) that does rebalancing would be a first step in this direction.

I know volatility is always good if the price curve points in the right direction But at the long term, Bitcoin can gain much more ground (use cases etc.) if volatility is significantly lower than now. The goal should be that the probability to run into a crash of more than 10% in 24 hours approaches <1%, and a 5% crash, let's say, less than 2-3%.

We just need to go with the flow of the market, when we think that we will lose on it then better wait a little while,hold on to that coins until everything seems fine. In volatility we xan earn we just need to know when it's the time for our coins.

Yes, we need to travel along with the market. The problem arises when the user expects a much bigger profit margin when the market seems low. When one gets this understanding automatically bitcoin volatility won't be considered a big issue by the users who have been with fear about the volatile nature of the coin.

[jhonjhon]

still going to be a long time before bitcoin becomes less volatile so much speculation on how high the price can go

Probably it could be hard, unless someone will take controlled on bitcoin. Because price change everytime, bitcoin is totally dependent on the flow of demand and supply in the market.

[CyberKuro]

Bitcoin volatility could be reduced as time goes on. Fiat currency has been around for centuries and backed by government, that's why fiat currency just fluctuate a bit depend on a country economy development. If more people, business and companies adopt bitcoin which make this coin spread widely without only some people hold big portion of bitcoin, will be a step toward stable price.

[xuan87]

I agree that the volatility should be more stable, but it is not that easy to controlled it, since crypto currency is all about supply and demand, but with more people adapting Bitcoin the volatility could be pressed down, with the high volatility like it is disadvantage to used Bitcoin as currency, but volatility also plays an important role for traders and it is one things that keep Bitcoin alive