High Price hinderance to Bitcoin Adoption( volatility problem)

[casey15]

Hello Bitcointalkers
I think by now we should know that the high price and volatility of bitcoin usually have a dual effect on its adoption. It can act as a powerful drive that initiates adoption or it can be a barrier to practical everyday use.

Here are my thoughts on both effects

A high price is almost always accompanied with high volatility and for a currency to be effective, its value has to be relatively stable so that it can be used as a reliable unit of account. Extreme price fluctuation  makes it impractical and difficult for businesses to set fixed prices in Bitcoin.
When price is skyrocketing, users are motivated to hold rather than spend it.. this makes bitcoin somewhat of a speculative asset or a store of value rather than a medium of exchange. This high volatility will make gathering profits difficult for businesses as price can drop massively within minutes.
 The experience of El Salvador shows this real world issue where people preferred the US dollar to bitcoin. This too also affects the divisibility of the coin such as Satoshi because their value also changes with bitcoin price.

On the other hand, this high price usually draws attention to bitcoin making people want to invest, mostly as a speculative move in other to bag profits.
The continuous increase in price supports the idea that bitcoin is a superior store of value especially in countries with high inflation or political instability. In this context, using bitcoin as means of transaction even with the high volatility is sometimes preferred to using the rapidly devaluating national currency.

For me, i do think that there is still a long way before bitcoin can be fully adopted, not because of governmental bodies but because of its high volatility. It price does not necessarily need to be low, but it needs to be less volatile.. Currently, its volatility only drives towards investment adoption and not Payment adoption.
Your thought on this will be appreciated.

[Odusko]

I don't expect government all over the world to adopt Bitcoin as a currency that will never happen, at least they rather will create their stable coins which we already have them, Bitcoin is best as an alternative in the economy, most especially the informal economy, those that take Bitcoin for payment have already known the volatilities and high price of the assets, but also can get paid with the smallest amount of sats as long as it meets their pricing for those goods or services.

[Ruttoshi]

its value has to be relatively stable so that it can be used as a reliable unit of account. Extreme price fluctuation  makes it impractical and difficult for businesses to set fixed prices in Bitcoin.This high volatility will make gathering profits difficult for businesses as price can drop massively within minutes.

Bitcoin is not a stablecoin but a volatile one and that is what makes bitcoin interesting for traders to make profits from. I believe that bitcoin adoption is increasing due to the volatility since investors believes that it is a hedge against inflation and a store of value overtime. Any coin that the price of stable will be affected by inflation because there's no difference between that coin and fiat.

If you're a business man and want to accept bitcoin, you can convert your capital to USDT and leave your profit in bitcoin or better still convert the money to usdt. The volatile nature of bitcoin does not stop those who are using it for daily transactions to stop using it if not we won't be seeing transactions in the mempool all the time.

Bitcoin adoption might be slow but it is increasing overtime, don't forget that initially, government and big tech companies weren't interested in bitcoin but currently, they're very much interested in accumulating bitcoin. Bitcoin is for all but not everyone will adopt it.

[retaur]

Most people's interactions with money are debt based and savings/investment based.

I don't think people are going to be taking loans out in the value of a crypto enmasse unless there's some decent incentive.

Things like large savings that don't need to be accessed for a while are more likely to see usage for Bitcoin and it's still an acceptable medium of exchange in a lot of places (especially for international transfers - even with use of a payment provider - it's often the cheapest option).

[Ambatman]

Extreme price fluctuation  makes it impractical and difficult for businesses to set fixed prices in Bitcoin.
When price is skyrocketing, users are motivated to hold rather than spend it.. this makes bitcoin somewhat of a speculative asset or a store of value rather than a medium of exchange.

Check out this uncommon POV
Bitcoin doesn't change. Just it's perceived value in the market which is measured in dollars.
0.01BTC is 0.01BTC. Even if the price falls or rises.
They were campaigns that paid in Bitcoin and unit don't change even if the market value do
That's unit of account.

Don't listen to my jargons. Could be wrong.

High Price hinderance to Bitcoin Adoption( volatility problem)

Volatility is the reason we currently experiencing increasing adoption
People know they would make more Holding bitcoin than bonds and Fiat which are relatively stable.

[Porfirii]

A high price is almost always accompanied with high volatility and for a currency to be effective, its value has to be relatively stable so that it can be used as a reliable unit of account. Extreme price fluctuation  makes it impractical and difficult for businesses to set fixed prices in Bitcoin.
When price is skyrocketing, users are motivated to hold rather than spend it.. this makes bitcoin somewhat of a speculative asset or a store of value rather than a medium of exchange. This high volatility will make gathering profits difficult for businesses as price can drop massively within minutes.
 The experience of El Salvador shows this real world issue where people preferred the US dollar to bitcoin. This too also affects the divisibility of the coin such as Satoshi because their value also changes with bitcoin price.

I agree with you that Bitcoin's volatility poses challenges for it's daily use as a means of payment or exchange, but I don't agree that a high price is almost always accompanied with high volatility. In fact, although it may be a coincidence, the volatility of Bitcoin this year, when is most expensive, has been quite low in percentage terms compared to previous exercises, and many users have expressed their belief that it is because of a relationship between higher price and lower volatility, precisely.

[Satofan44]

Bitcoin's volatility is now medium to low, the thread is wrong. Stop repeating this from the past, it is no longer true. The volatility is consistently going down.

I don't think people are going to be taking loans out in the value of a crypto enmasse unless there's some decent incentive.

It is not for a lack of incentive, it is because the financial terms that you get are junk. Often it would be 50% loan to value and 10-20% APR for a year. Only brainless modern consumers would accept something like that. Meanwhile the ultra rich get 1-2% interest rates for large loans. Once competition heats up, I expect a lot of people to take out loans in some proportion of their holdings. It is better than selling Bitcoin in any case.

Things like large savings that don't need to be accessed for a while are more likely to see usage for Bitcoin and it's still an acceptable medium of exchange in a lot of places (especially for international transfers - even with use of a payment provider - it's often the cheapest option).

Bitcoin works as a medium exchange for everything. Do you need high value but not high speed? Onchain transfer. Do you need less value but you need a high speed transfer? Lightning transfer. Very simple.

[retaur]

I don't think people are going to be taking loans out in the value of a crypto enmasse unless there's some decent incentive.

It is not for a lack of incentive, it is because the financial terms that you get are junk. Often it would be 50% loan to value and 10-20% APR for a year. Only brainless modern consumers would accept something like that. Meanwhile the ultra rich get 1-2% interest rates for large loans. Once competition heats up, I expect a lot of people to take out loans in some proportion of their holdings. It is better than selling Bitcoin in any case.

Aave look to have 2-3% loan interest fees on Ethereum. That's very close to you suggesting the 1-2% rates but with a 70% LTV which isn't great... I'm not sure if liquity work out more cost effective as I'm not sure I trust them but they offer closer to 90% LTV iirc.



I was, however, pointing more towards the idea of people taking loans by borrowing Bitcoin which is really what's fuelling the cash/fiat system (fractional reserve + you know what the value will be when you need to repay).

[Satofan44]

I don't think people are going to be taking loans out in the value of a crypto enmasse unless there's some decent incentive.

It is not for a lack of incentive, it is because the financial terms that you get are junk. Often it would be 50% loan to value and 10-20% APR for a year. Only brainless modern consumers would accept something like that. Meanwhile the ultra rich get 1-2% interest rates for large loans. Once competition heats up, I expect a lot of people to take out loans in some proportion of their holdings. It is better than selling Bitcoin in any case.

Aave look to have 2-3% loan interest fees on Ethereum. That's very close to you suggesting the 1-2% rates but with a 70% LTV which isn't great... I'm not sure if liquity work out more cost effective as I'm not sure I trust them but they offer closer to 90% LTV iirc.

Variable or fixed interest? If it is variable then it is useless to consider this as a low interest option. You must focus on the interest rates of supplying crypto like Bitcoin and borrowing USD, everything else is wrong and extremely risky. DeFi most often has variable interest rates that is why it is useless for anything other than farming.

I was, however, pointing more towards the idea of people taking loans by borrowing Bitcoin which is really what's fuelling the cash/fiat system (fractional reserve + you know what the value will be when you need to repay).

Why would you borrow Bitcoin? It is better to buy it directly.

[Ucy]

Well, Bitcoin is not designed to be fiat currency or "stablecoin", neither is it designed to have constant low volatility. It's meant to be a Store of value, and that would mean its price getting high enough to maintain or increase the value of holders funds, relative to inflation in their countries. The price getting big highs/lows do not happen everyday, it's occasional thing. When it's time for bigger price gain, it could happen daily for few weeks and become less volatile for some times.
We want Bitcoin to remain mostly as a Store of Value while occasionally getting exchanged for valuable things (preferably in decentralized peer-to-peer manner). We want to discourage unnecessary Bitcoin spending, and instead encourage productivity...so that whatever you buy with your bitcoin would profit you alot or make you very productive. And this profits or productivity should be mostly channeled in the Bitcoin economy/network so that Bitcoin continues to increase more in value and price.
It's important to note that high volatility will likely not discourage people from spending their Bitcoin once they realize that what they will spend it on will profit them like holding Bitcoin. And frequent price change wouldn't be a problem if you fix price of products/services in something more stable, or if you occasionally reduce their Bitcoin prices to their actual worth  The latter would be nice and give a feeling of price reduction or deflationary Bitcoin economy. We ought to be opposite of fiat economy or different.


By the way, haven't you considered the fact that high price would mean people having more bitcoins to spend, while low price can discourage spending? Notwistanding, it's important to spend on things that are worth it rather than low value or evil things.

In regards to the El Salvador part, you have to understand that the country, like others, operate on fiat/centralized system. Bitcoin is a different system entirely, and is more suitable for free people with awareness of truth. So, expect people who are deep in fiat system to be resistant to things that are pro-freedom

[casey15]

Bitcoin doesn't change. Just it's perceived value in the market which is measured in dollars
0.01BTC is 0.01BTC. Even if the price falls or rises.
They were campaigns that paid in Bitcoin and unit don't change even if the market value do
That's unit of account.

That's the point.. it needs to have a perceived value... Value is a comparison with something else and in this case the dollar... It is true that 0.01 BTC remains the same in QUANTITY but the VALUE at which it is measured is different. So $50 worth of Bitcoin today is not $50 tomorrow.. this inconsistencies is one reason fiat will always have it edge

[toryn388]

Yeah, you’re right that volatility kills the idea of it being a day-to-day currency. Nobody wants to price coffee in something that can swing 5% by lunch. Bitcoin feels more like digital gold now, useful for saving, not spending.

[adultcrypto]

Volatility is the reason we currently experiencing increasing adoption
People know they would make more Holding bitcoin than bonds and Fiat which are relatively stable.

I think it should be the opposite because volatility is actually the reason many people and businesses are reluctant to adopt bitcoin as a means payment in their daily needs. Some people may think that it is the high transaction cost that is the reason for slower adoption of bitcoin but that is just one of the reason because even now that fees are a little lower, we did not see any significant increase in adoption rather most speculators joined the business for the money they will make from holding.

[Donneski]

You made some solid points and I also think the relationship between price, volatility and adoption is quite tricky.

High prices definitely bring more attention and drive investment adoption but when it comes to day-to-day use, volatility creates too much uncertainty for both consumers and merchants.

 Imagine a business setting prices in BTC only for the value to drop 5–10% within a day, it’s hard to operate like that.


I believe the key isn’t necessarily a low price but rather a mature market with enough liquidity and depth to reduce wild swings.

 Once volatility calms down, I believe payment adoption will follow more naturally.

[Kelvinid]

For me, i do think that there is still a long way before bitcoin can be fully adopted, not because of governmental bodies but because of its high volatility. It price does not necessarily need to be low, but it needs to be less volatile.. Currently, its volatility only drives towards investment adoption and not Payment adoption.
Your thought on this will be appreciated.

What makes Bitcoin famous is its volatility. And people make use of it to generate profit. That is why I don't think it is the risky nature making it less adapted but rather the high price. Although we can buy them in sats, it still discourages poor people from buying because it is already expensive. Whether you agree or disagree, I say that Bitcoin is for rich people.

I could be wrong, but even 10 years from now, it is difficult to expect that Bitcoin will become a global currency if the price remains that high. As we can see right now, people are buying Bitcoin for investment purposes, not as currency.

[retaur]

Variable or fixed interest? If it is variable then it is useless to consider this as a low interest option. You must focus on the interest rates of supplying crypto like Bitcoin and borrowing USD, everything else is wrong and extremely risky. DeFi most often has variable interest rates that is why it is useless for anything other than farming.

That's why I mentioned liquity too, that has fixed interest in Eth loans but I'm not sure I trust it (I'd say they're still too small but they've always been small).

Bitcoin tops out, then alts. I'm holding mostly alts for that reason now in defi products after taking out my initial investment because the price went nicely in my favour.

Why would you borrow Bitcoin? It is better to buy it directly.

Fiat derives its value from having desperate people at the bottom, middle and top scrambling to repay their debts. The fact bitcoin doesn't have this is very nice but it means it's not fully on par with other monetary assets.

[WatChe]

I don't expect government all over the world to adopt Bitcoin as a currency that will never happen, at least they rather will create their stable coins which we already have them, Bitcoin is best as an alternative in the economy, most especially the informal economy, those that take Bitcoin for payment have already known the volatilities and high price of the assets, but also can get paid with the smallest amount of sats as long as it meets their pricing for those goods or services.

The government's are not against Bitcoin but it's decentralized nature. Stable coins like USDT are very much centralized and governments have no problem in adopting such centralized coins or issuing there own centralized coins. The governments are well aware of benefits of Bitcoins but the issue is that the benefits provided by Bitcoin doesn't suits governments. Every government want a financial system which it can fully control and this is something Bitcoin don't provide.

[casey15]

I could be wrong, but even 10 years from now, it is difficult to expect that Bitcoin will become a global currency if the price remains that high. As we can see right now, people are buying Bitcoin for investment purposes, not as currency.

That is the Point I'm driving at. For now I see bitcoin more of a store of value and investment asset rather than a medium of exchange. Even if the price remains very high, it can still be used as a currency, the problem is the volatility. As at the beginning pf the year, the price was sitting just above $99k but now it is $125k and still climbing. The big change in price over a short period is the problem.. it only favors those looking for profit and not for daily transactions

[BitGoba]

Bitcoin isn’t really volatile  1 sats is always 1 sats.
What changes is the value of fiat currencies compared to Bitcoin.To understand this, you need to understand how the fiat system works, how dollars are “mined,” and who the “nodes” are in the dollar system. The best way is to read Saifedean Ammous books  he wrote Bitcoin Standard and  Fiat Standard.In  Fiat Standard, Saifedean Ammous explains in detail how fiat money works and why it is inherently unstable.

The US dollar is actually the volatile one, because 1 dollar isn’t always the same. It can be printed out of thin air in unlimited amounts, which causes inflation.We all see this in real life  every year, you can buy less and less with $100, while the prices of goods and services keep going up.

Bitcoin adoption will come gradually, as people start to understand that Bitcoin is actually hard money  stable in its supply  while the dollar is unstable and volatile.It will take time  many people might not understand at first that Bitcoin is more stable and harder money, but eventually they will realize that Bitcoin keeps strengthening against the dollar in the long term, and they will want to adopt this form of money.