The BIS has attributed the volatility of bitcoin to the lack of a central bank

[alyssa85]

https://voxeu.org/article/some-simple-bitcoin-economics

According to a Financial Times article from June 2018, the Bank for International Settlements (BIS) traces the instability of crypto-prices back to the lack of a crypto central bank. The fact that the value of Bitcoin is not controlled by a designated central bank constitutes a major difference to traditional currencies.

The US Federal Reserve Bank, for instance, injects or withdraws dollars from circulation in order to meet its policy goals such as a stable rate of inflation. The supply of Bitcoin, in contrast, evolves due to decentralised computing activities of 'miners' and can only increase over time.  Therefore, a traditional tool for promoting price stability is unavailable for cryptocurrencies. The BIS addresses 'unstable value' as one major challenge for cryptocurrencies for becoming major currencies in the long run.

I personally think the volatility is because so few are trading it. The more people trading a currency, the less likely a single person can move the price either with a pump or dump. It's very hard for a single actor to move the dollar against another currency for example because they'd need huge firepower.

Unfortunately trading volumes have decreased since Dec 2017, so the volatility will remain.

[Beerwizzard]

That's not really about the amount of traders but about the trading volume and market cap. No matter who is regulating the market but until for example the market cap is only 1$ nothing can ensure that tomorrow someone won't buy it for 2$ and make this currency extremely volatile.  First you need to get a mature market and only then you can think about the ways of regulating it.

[avikz]

I personally think the volatility is because so few are trading it. The more people trading a currency, the less likely a single person can move the price either with a pump or dump. It's very hard for a single actor to move the dollar against another currency for example because they'd need huge firepower.

Unfortunately trading volumes have decreased since Dec 2017, so the volatility will remain.

I don't really agree with you! The volatilty of bitcoin's price is not a result of any single action! There are many reasons behind it and it is almost impossible for a trader to manipulate the market in large quantum. Doesn't matter how many or how less traders are active in the market!

I can recommend an article to you which has a detailed explanation on bitcoin's volatilty. Read below,

https://www.fxcm.com/uk/insights/what-causes-volatility-in-bitcoin/

Apart from these reasons, there are other reasons as well which can play a big role in volatility, on which we may not have any visibility! It's not easy to manipulate a billion dollar market by some traders!

[BitFinnese]

I guess volatility will always be there.  Since the market is commanded by supply and demand and with people changing stance every time they saw an opportunity, I do not think that volatility will be gone, it will only be minimized once it is traded by more people.  Even with regulation, since  Bitcoin price is driven by speculation, it will only do little towards it.

[Hydrogen]

Stocks like tesla motors (TSLA) displayed higher volatility than bitcoin over the past few months. Official state mandated fiat currencies like venezuela's bolivar are currently hyperinflating at outrageous rates, far more volatile & unstable than any crypto, despite falling under the jurisdiction of a central bank.

Notions of bitcoin and crypto being prone to massive price swings, substantially more chaotic than other currencies or investment vehicles, may be an urban myth at this point. Many of these published pieces appear to make zero attempt at quantifying their claims. They cite no metrics for bitcoin's volatility in 2018 or 2019 and make no attempt to contrast these numbers with stock market volatility, fiat currencies or draw any useful comparison. It doesn't amount to more than a "take my word for it, bitcoin is very volatile" face value claim. Which constitutes a low standard in terms of journalism and publishing.

In terms of history, the zimbabwe dollar and deutsch mark both hyperinflated despite central banks which could suggest centralized abstracts of management are overrated and fail to provide guaranteed stability. Our 2008 global economic crisis occurred despite the existence of central banks. The united states being more than $20 trillion in debt might also be partly attributed to central banks as architects of fiscal and economic policy. If skepticism is indeed our goal, there are many questions about OP's study which could be raised. IF.

[vv181]

~
I personally think the volatility is because so few are trading it. The more people trading a currency, the less likely a single person can move the price either with a pump or dump. It's very hard for a single actor to move the dollar against another currency for example because they'd need huge firepower.
~

The volatility within the bitcoin markets is way more than just the trading action. The technologies itself is still at an early age, we do need to understand it is a revolutionary technology. It requires a lot of time for the mainstream to be able to comprehend the system, not to mention the lack of user-friendliness. Nevertheless, I'd agree what the trading part that you mention is indeed one of the few reasons that make Bitcoin volatiles. Personally, I'd believe in the future if mainstream already well-understood and get used to Bitcoin, the volatility will decrease.

[daarul50]

I personally think the volatility is because so few are trading it. The more people trading a currency, the less likely a single person can move the price either with a pump or dump. It's very hard for a single actor to move the dollar against another currency for example because they'd need huge firepower.

Unfortunately trading volumes have decreased since Dec 2017, so the volatility will remain.

Volatility has always been a problem for cryptocurrency especially now that people don't consider crypto as a currency but they consider crypto as a digital trading asset and they don't care about the development of crypto as a currency because they only care about the benefits they can get with crypto trading so that prices will not be stable until these people stop to assume that crypto is a profitable asset.

[LeGaulois]

They're talking stability but look at a period like the one from January to April when we're crawling to the $3,500 on average. The price has been stable and we didn't get any high volatility. So it's totally possible, who knows if in the future the price stays stable for several years.
Fuck a central bank, it's the last thing we need.

[b3llsf1l3s]

I personally think the volatility is because so few are trading it. The more people trading a currency, the less likely a single person can move the price either with a pump or dump. It's very hard for a single actor to move the dollar against another currency for example because they'd need huge firepower.

Unfortunately trading volumes have decreased since Dec 2017, so the volatility will remain.

That is true, but the real thing that can make the price unstable is that there is already a huge amount of exchange, so traders are also scattered, causing the previous exchange to be crowded to be deserted as a result of each coin making their own platform.

[Genemind]

I personally think the volatility is because so few are trading it. The more people trading a currency, the less likely a single person can move the price either with a pump or dump. It's very hard for a single actor to move the dollar against another currency for example because they'd need huge firepower.

Unfortunately trading volumes have decreased since Dec 2017, so the volatility will remain.

It's not actually just about the number of people trading. There are a lot of factors that affects the price movement since cryptocurrency price is derived from market activity. People within the market dictates the price and there are a lot of factors affecting market activity.

I honestly think that there's no need to have a central bank for crypto. It will beat the purpose of decentralization if that is the case.

[Adriano2010]

I also don't think is a good comparation with a bank, because bitcoin volatility is bring by people who trade and some of them but more and this cause the price goes high and when there is a lot of seller make the price goes down.

[BitHodler]

So it's totally possible, who knows if in the future the price stays stable for several years.

At some point the elasticity of the price will decrease because of how much we have gone up already. Bitcoin won't continue doing x10-x100 bull cycles endlessly. I'm sure we have a few bull runs left before we get there.

Gold is at that stage already. In order to combat the lack of volatility, brokers offer x500 leverage multipliers, which make BitMEX's x100 leverage look like a joke. Bitcoin will follow a similar path in my opinion.

I actually enjoy the wild swings of this market because they offer an interesting trading opportunity, and it reminds me of how relatively early we still are. These revolutions happen only once every few hundred years.

[gentlemand]

It's not rocket science. The volatility comes from a tiny size, shit exchanges and an audience that doesn't know what to do with it. Volatility goes down when it's enormous and established.

Last time I checked gold didn't have a central bank either and that's welcome in many a hall of power.

[d5000]

Stocks like tesla motors (TSLA) displayed higher volatility than bitcoin over the past few months. Official state mandated fiat currencies like venezuela's bolivar are currently hyperinflating at outrageous rates, far more volatile & unstable than any crypto, despite falling under the jurisdiction of a central bank.

It's good you're mentioning stocks and volatile currencies, because they give us a clue why Bitcoin's volatility is a bit different.

For example, hyperinflationary currencies most of the time go only down against other assets, only the speed of the downfall changes sometimes, but often remains rather predictable. As an example, in the last years (since 2008 approximately) the Argentine Peso went down every year between 20 and 40% against most goods (not necessarily against the US dollar), only once (2018) the loss was higher.

Stocks, on the other hand, are more similar to Bitcoin as they show strong rallies and crashes, but there is a big difference: For stocks, there are lots of metrics to evaluate if they're "overvalued" or "undervalued", as they correspond to shares of real companies.

In Bitcoin, however, we have none of these indicators, as there is no "real" company behind Bitcoin. Bitcoin's value is tied only to supply and demand, so we have to try to get information about these two indicators. Transaction activity and trade activity are indicators we could take to evaluate its adoption and thus "demand", but these indicators are very weak. Both indicators regularly go up if there is a spike in volatility in price, but not necessarily that may be a bullish sign (although long-term transaction activity growth is normally bullish).

So speculators are much more prone to FOMO and crash panics because they don't know where they have to expect the Bitcoin price. Many of them sell simply when the price goes down, and buy if the price go up, showing thus a very cyclic behavior, which favours volatility.

If Bitcoin was used more "as a currency" and less for speculation, volatility would surely go down. But there is a long way to go until this point.

[justspare]

The Fiat central bank has been controlling for a while, what achievement have they gotten on it other than the currency falling into the pocket of few people to enrich themselves at the detriment of the poor people. We don’t need the involvement of central bank in cryptocurrency because once they get involved; the coin will be regulated and become a stable coin.

We need the volatility now to really be able to make money through it, when bitcoin speeded up to almost $20,000 in the last bull, if the market had not fallen back, would there have been chance for holdlers now to buy and become rich in future ? Even if BTC will become stable, let it gradually work its path through it in future when we have massive adoption.

[d5000]

We need the volatility now to really be able to make money through it, when bitcoin speeded up to almost $20,000 in the last bull, if the market had not fallen back, would there have been chance for holdlers now to buy and become rich in future ? Even if BTC will become stable, let it gradually work its path through it in future when we have massive adoption.

Think again ...

If the main reason to buy Bitcoin was to "become rich", why should people buy it once it becomes more stable?

Bitcoin has to evolve, somewhen, from a "speculative asset" to a "currency" or even a "store of value" (which it still isn't, as of now, see this tweet from @MustStopMurad). But how? I consider that the most important challenge for the community in the coming years. But I'm almost sure that promoting BTC exclusively as a tool to "get rich" is counterproductive for that goal, because it does not only boost volatility, but also limits the audience of Bitcoin to speculators.

[STT]

This is really too funny because its the opposite of how I consider FIAT troubles, volatility is mostly a result of central banks and by extension government interference in economies to favour political ends over business and currency stability.

Crypto in some part owes its existence to the ongoing failure by central banks so it seems very ironic that BIS is calling for crypto to align itself with more traditional interests.   I cant blame them for seeing things that way.
Nothing has to be done to address their concerns, its already the case that some blockchains do have a centralised kind of authority that at least in part regulates value.   Thats how I see XRP with giant reserves locked until a future date and at their control they will handle value and attribute it to who they see fit.    If BIS is correct an alternate system will overtake BTC as surely BTC is entirely open to competition and so replacement by better systems.    Any standard even if new if less volatile (though this is contradictory some, growth is volatility?) I would expect to take over in time as there is benefit to business from a reliable standard, we shall have to see if that is what occurs next

If the main reason to buy Bitcoin was to "become rich", why should people buy it once it becomes more stable?

That main reason for Bitcoin is not to become rich, if that were the only reason it would not continue.   Thats a large part of criticism for it and why many expect it to fail 6 years ago or more as it was famously gaining alot at that time.   
It could easily allow people to be better off then they might be otherwise, thats feasibly the result of any well operating system and stability is not a negative to that

[1Referee]

We need the volatility now to really be able to make money through it, when bitcoin speeded up to almost $20,000 in the last bull, if the market had not fallen back, would there have been chance for holdlers now to buy and become rich in future ? Even if BTC will become stable, let it gradually work its path through it in future when we have massive adoption.

There is always volatility in the price of an asset. People here assume that once the price of Bitcoin becomes "stable" there is no way to make money anymore, but that's exactly what leverage is for. How do you think institutions trade fiat currencies with 0.1% swings? You crank up the leverage and you're good to go.

People here need 10-20% movements in order to make money, but you can make just as much money with 0.1-0.2% fluctuations.

[traderethereum]

I believe that the volatility will always happen from day by day, but I don't think that it's because a few traders who trade in the market. I am sure that in every exchange, many traders have to try to make a profit.
I agree that it is almost impossible for one person to moves the price to the price he wants because the volumes in the market will bigger than his funds.

[dothebeats]

Volatility will never be removed on bitcoin and crypto and we certainly don't need any central banks to control the flow of coins in circulation and the value of each coin as well. That's the beauty of a decentralized, deflationary currency: it cannot fail since it has no central point, but volatility is also a boon of cryptos as due to this, merchants can't meddle with it, moreso accept it on their platforms as a form of payment. Should they accept it, they still need an intermediary to ensure profits which basically just removes yet another portion of the profits, too.