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Author Topic: Bitcoin volatility paradox  (Read 2782 times)
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August 08, 2013, 05:30:39 AM

Economic equilibrium, the study of quantity, demand, supply, and above all behaviour. The possible price of something can be approximated pretty close,... it's just knowing when it will be at any given point that is the problem; Behaviour, it changes everything.
  It seems Bitcoin was designed with a very volatile base amount, a little psychological limit: 21 million coins... that are subdivided to 8 decimal places or more. I think that all the monetary statistics are kept in standard units, only in exchanges do you see more than 3 decimals beyond the point. What happens when you try to add humans to determine it's value? Anything can happen, maybe it's just the way that the things you use to interact with Bitcoin are designed that are the problem, maybe it's the mindset that has to change the way we understand.

 I'm sure there are a lot of reasons for Bitcoin's fluctuations, but to attribute them to a single cause is not seeing the whole picture, it's a big world out there. The major fluctuations depend on how Bitcoin is being used, speculation, purchases, exchange, money transfer, stock, time stamp, savings,etc different uses will have different effects on it's price. it's something to think about. My personal thought is that the design would be more economically viable with more than 1 billion available coins, but this design choice creates an extra hurdle, for it to be more useful, the economy. How much can you do with the purchasing power of only 1 billion dollars? more coins more buying power for a whole economy, but with this it requires a lot of demand to move the price or a lot of people who know how valuable it truly is.

Hence, instability, the design forces equilibrium, people must reach a concensus on ,"how much is it worth?" and "What would be useful?"

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