The Impact of Change in Prices on Bitcoin's utility as Currency

[aardvark15]

In many situations, the price of Bitcoin doesn’t really matter when using it for purchases. For example, if someone coverts $100 worth of fiat to Bitcoin for a $100 purchase, then he is just spending $100 regardless of how much Bitcoin that is at the time.

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[deisik]

You can see from the graph above that Litecoin is most volatile among three in last 6 months. If I consider graph from 2018 then Doge will also become as volatile as Litecoin

It is good that you brought up the example of Dogecoin

So why can Dogecoin be interesting for the purposes of this thread? Well, it may be not for the currency aspect of it as such (as no one is using doges as a currency, let's be honest here), but for an aspect that still has nothing to do with sheer speculation, and that seems to be quite resonating with the idea presented here. What I mean to say is that Dogecoin is probably in the list of top 10 coins that have most real-life use and application if not just the most used cryptocurrency in this regard (however paradoxical and counterintuitive it may sound)

This coin is probably the best coin for gambling, and that is definitely not speculation. The implication is that such use will prop up its value no matter where the whole cryptocurrency market is going, especially when it's going down. Indeed, it is not free from the overwhelming impact that Bitcoin's price dynamic has over all other cryptocurrencies out there, but it still should be less pronounced. And what's more important here, the effect of this impact, or rather lack thereof, can be easily assessed numerically, for example, by using correlation metrics

I partially agree with you. When it comes to utility, Dogecoin is surely one of the top 5 coins, no doubt in that. With over 122B supply in circulation and 1 DOGE transaction fees, Dogecoin is heaven for gamblers and to use for micro-payments. Even I am using DOGE as the primary coin in my under-construction gambling site.

But it's wrong to assume that Dogecoin is developed enough to be considered free from the impact of Bitcoin. When it comes to trading market, Dogecoin is just another sheep in the herd that moves in the same direction as rest of the sheep going. But there is one significant difference between the Dogecoin's chart and the charts of other altcoins and that is the pattern of 'Horizontal Parallel Channel'. If we ignore the pump of June 2017 then we will notice that the value of DOGE keep floating between the closed bracket. Even when the rest of market was crashing like hell, Dogecoin was able to maintain its minimum value which is around 30 sats. This may imply that real utility of Doge do have some impact on its trading value

Sorry, didn't see your comment coming my way in time

But it definitely needs to be addressed (and probably merited), what I'm doing now. Technically, I don't deny a certain correlation between these two cryptocurrencies (or dependence of the Dogecoin price on the price of Bitcoin if you please). What I want to say, or rather further expand on what you already said, is that there is a limit on how low the price of Dogecoin can go (in the mid and long term). What does it tell us?

It basically tells us that when Bitcoin crashes, the price of Dogecoin will hit a price floor, i.e. reach a definite support level which is for the most part determined by the coin's real use and application. Why is it so important? The importance is that we can see how the real-life application (even if in the gambling domain only) starts to override speculation, something we don't see with other coins (even with Bitcoin itself)

I don't understand what @teosanru said as well. The term marginal utility is for satisfaction "limit" when someone consumes goods or services, right? It might not be a 100% suitable term for money or assets

The idea of marginal utility is not applicable to money because money is an abstract concept whose value comes only through (the possibility of) spending it (now or in the future). In other words, it doesn't have value of its own (other than transactional utility), so the tenets of marginal utility cannot be applied to it. Money is only an intermediary, and it is goods and services which can be bought with it that are subject to the effects of marginal utility, not money itself

Simply put, money is beyond the scope of the law of marginal utility

[el kaka22]

The reality is that utility of bitcoin is also what we call the "adoption of mass" in bitcoin and the bigger it gets the bigger utility bitcoin has as well. It is not really directly related if you ask me because every single year bitcoin gets some sort of utility but when you look at 2017 there was even more than today which is the outliner to this occasion.

Because, in 2017 there was bitcoin in many other huge places like Microsoft started to accept for a while and steam did so, those are MILLIONS of dollars worth of bitcoin. What happened then? Well, bitcoin went down and all those companies made a huge loss which they can handle because they are huge but they removed bitcoin as well, we need to make sure they get paid in bitcoin but keep it in usd which would make them add it again and price of bitcoin could go up again.

[CarnagexD]

About the volatility of Bitcoin will indeed be a problem when Bitcoin is used as a Currency. Significant price changes make people unwilling to accept payments using bitcoin. I prefer bitcoin as an investment, because buying goods using bitcoin is not very good for me, especially if the price of Bitcoin goes up. This will make doubts sellers and buyers who use bitcoin.

Volatility isn't going to be problem if we could just establish a well founded standard price, but who will be the one to initiate that? Maybe a group of big companies? Our government? Only if we could just stuck the price at a specific short price range. Having the idea of bitcoin to be stable would cost billion of dollars to lower its volatility and avoid fluctuation. Bitcoin seen by ordinary people as an alternative investment in digital form already negates the idea of bitcoin to use as a currency to spend in daily basis.  There are already goods and services that can be paid with bitcoins, maybe that is enough for now with cryptocurrencies since it's still have a huge room for growth and improvement.

But there are some people who use bitcoin as a currency and pay for goods and services using bitcoin. Being a currency or just an investment depends on the person who holds it.

I also use cryptocurrency sometimes as mode of payment especially when transacting p2p, I just don't do it when the price is low.

[Hamphser]

In many situations, the price of Bitcoin doesn’t really matter when using it for purchases. For example, if someone coverts $100 worth of fiat to Bitcoin for a $100 purchase, then he is just spending $100 regardless of how much Bitcoin that is at the time.

You don't get it, do you? The more you spend bitcoin or convert it into fiat the more you are actually adding the volume in those exchanges and that's the reason why prices of bitcoin starting to plummet slowly. Imagine if for example this coming December, i know a lot of them will be converting bitcoin to fiat due to the holidays. Remember how the price starts to go down each week during that month?

[audaciousbeing]

The impact of changes in price on bitcoin to be used as a medium of exchange cannot be overemphasized because the volatility for me, is the bane of adoption which is why people who have made genuine contribution to the discussion will want to continue to restrict its use to a store of value where people acquire it with the sole aim of making profit hoping that its value would increase which makes it have a more intrinsic value than the actual and that is going to be stumbling block to massive adoption in the marketplace.

However, it is my hope that this limitation would not be there for long as the penetration is low at the moment, it continues to grow and the growth limits the volatility.

[supercanada1]

The impact of changes in price on bitcoin to be used as a medium of exchange cannot be overemphasized because the volatility for me, is the bane of adoption which is why people who have made genuine contribution to the discussion will want to continue to restrict its use to a store of value where people acquire it with the sole aim of making profit hoping that its value would increase which makes it have a more intrinsic value than the actual and that is going to be stumbling block to massive adoption in the marketplace.

However, it is my hope that this limitation would not be there for long as the penetration is low at the moment, it continues to grow and the growth limits the volatility.

Volatility is the need of present moment. Investors want to make profits first and then utilize the earned money in commerce. The idea of buying with digital currencies is not as much exciting and wanted as the idea to become rich by investing in crypto coins. Still, a big percentage of world population is unaware of bitcoin and altcoins. But this won’t remain the case for long and these assets are already being used as a medium of exchange at some places.

[fiulpro]

But I do think that no matter what the price we can always use certain minimum value , the face that Bitcoins can be broken down is smaller values is infact very feasible for the time the value of Bitcoins approaches something that will be hard for people to buy , but we can always have the smaller value .
I think it is because of the high value that people actually come to buy Bitcoins since that think there is a chance that it is going to be high again .
So it's like value is one thing that is attracting investors.

[stepwilli]

i totally agree on the last part on the op  . if btc price is low, many people will use it for paying because its not that valueable  at all  but if the value is high , people will think twice  and will end up hodling thier coins because its too valueable to spend it or waste it when you can earn more thru it if you will treat it as an investment asset . the impact is big if btc price rise and fall but i still prefer it to be a volatile  so that we can use it for both purposes occasionally .

I think that it is lack of understanding understating about the value of bitcoin that we use to think that it will be hard to pay with bitcoin when the value is high. It is just like the normal fiat currency, there are some off our coins that is high in value, but that does not mean that we do have lower denominations to make payment with them, the same way that we have lower denomination for fiat is the same way that we have lower denomination of bitcoin that we can make payment with when we want to buy thing that are low in price.

Like you said though, I also prefer this volatility like this because this is what makes us to make some profit that we are making in holding it. There is going to be some times that bitcoin will become a stable coin and we will not be able to see this volatility again.

[liuqi]

The impact of changes in price on bitcoin to be used as a medium of exchange cannot be overemphasized because the volatility for me, is the bane of adoption which is why people who have made genuine contribution to the discussion will want to continue to restrict its use to a store of value where people acquire it with the sole aim of making profit hoping that its value would increase which makes it have a more intrinsic value than the actual and that is going to be stumbling block to massive adoption in the marketplace.

However, it is my hope that this limitation would not be there for long as the penetration is low at the moment, it continues to grow and the growth limits the volatility.

Volatility is the need of present moment. Investors want to make profits first and then utilize the earned money in commerce. The idea of buying with digital currencies is not as much exciting and wanted as the idea to become rich by investing in crypto coins. Still, a big percentage of world population is unaware of bitcoin and altcoins. But this won’t remain the case for long and these assets are already being used as a medium of exchange at some places.

Volatility can be positive as well as negative which one you would like to do buddy. We need to have strong potential bump which can push the BTC value around 2k USD in the marketplace.
So  after that Bitcoin value will be grow more with the help of huge circulation and high demand in the market in both sides.

[GideonGono]

The impact of changes in price on bitcoin to be used as a medium of exchange cannot be overemphasized because the volatility for me, is the bane of adoption which is why people who have made genuine contribution to the discussion will want to continue to restrict its use to a store of value where people acquire it with the sole aim of making profit hoping that its value would increase which makes it have a more intrinsic value than the actual and that is going to be stumbling block to massive adoption in the marketplace.

However, it is my hope that this limitation would not be there for long as the penetration is low at the moment, it continues to grow and the growth limits the volatility.

Volatility is the need of present moment. Investors want to make profits first and then utilize the earned money in commerce. The idea of buying with digital currencies is not as much exciting and wanted as the idea to become rich by investing in crypto coins. Still, a big percentage of world population is unaware of bitcoin and altcoins. But this won’t remain the case for long and these assets are already being used as a medium of exchange at some places.

Volatility can be positive as well as negative which one you would like to do buddy. We need to have strong potential bump which can push the BTC value around 2k USD in the marketplace.
So  after that Bitcoin value will be grow more with the help of huge circulation and high demand in the market in both sides.

Everyone has its own take on volatility but if you are investing for long term then you should not worry much about it. Though through this high volatility, traders would utilize it in order to gain massive profits but in the future when a cryptocurrency like Bitcoin would come to a point that the market is so huge that the price would not move sharply in the graphs which simply means that it had become stable.