Bitcoin's Volatily - Good or Bad?

The forerunners of Bitcoin may have something else in their minds, but to this generation z, volatility is what makes cryptocurrency interesting to them, and that's why we are all in this fast pace web3 ecosystem.

The original Bitcoin white paper from Satoshi Nakamoto describes it as a system for electronic transactions without relying on trust and that is capable of storing value. This is the opposite of what some would have you believe. Bitcoin has been designed from the very beginning to replace the present monetary system based on a transfer of value between parties without the need for a trusted third party. The Bitcoin white paper does not describe some pseudo-anonymous digital cash that you can use to buy drugs over the dark web. Instead, Bitcoin is a settlement layer that enables peer-to-peer payments between parties instantly with no need to trust a third party with your funds.

However, the most common objection to bitcoin as a viable medium of exchange stems from a misunderstanding of its key features of a limited supply and volatile nature. Specifically, most people seem to believe that the high volatility of bitcoin’s price excludes it from becoming a useful medium of exchange. In fact, its volatility proves the opposite.

This argument makes several assumptions that are not necessarily valid.

First, it assumes that people are rational. But they are not. One of the main reasons bitcoin’s price is so volatile is because of its speculative nature, which can be attributed to the fact that its market is still in its infancy, with most of the trading activity driven by speculation rather than actual purchases.

Bitcoin has been both vilified and praised, but the same characteristic that attracts praise (price volatility) is often condemned. Volatility, however, is what makes Bitcoin useful, and price volatility is the most important thing in Bitcoin’s favor.

It's this volatility that draws all of us to this space, and it's the same thing that has kept us here all this while. Why, then, do we think volatility is a problem for Bitcoin to be used as a reliable means of commercial exchange. If volatility made you love Bitcoin, the same should make you spend Bitcoin.

Challenges for Bitcoin’s Transition to Being a global Medium of Exchange

Bitcoin is a revolutionary, disruptive, and world-changing technology. The idea behind it was to create a currency independent from any central authority, transferable electronically, more or less instantly, with very low transaction fees.

However, Bitcoin’s transaction fees has been on the rise. This is one of the major challenges hindering the digital currency from gaining global adoption. Transaction fees are important aspect to consider when dealing with digital currency. The reason for Bitcoin's high transaction fees is due to its scalability issue. However, a lot of people are building tools in form of a layer 2 to scale Bitcoin, thus reducing transaction fees significantly.

Another challenge hindering Bitcoin's global adoption is the fact that it has a fixed supply. Most people aren't comfortable with the idea of Bitcoin halving a fixed total supply of 21 M. This group of people are only ignorance, not anti-bitcoin. It's the limited fixed supply that makes Bitcoin a solid form of money that can be used as hedge against inflation in an uncertain economic landscape.

Despite all these challenges, the mass adoption of this cryptocurrency continue to go up year after year. Even though most people still wonder what it is and how to use it. The reason for that is a lack of understanding of its core concepts and implementation.

Will Bitcoin's volatility ever stop?

The volatility of Bitcoin’s price will definitely continue as long as the cryptocurrency market is still in its early stage, and the 21 M Bitcoin total supply is yet to be fully mined. Even if it should be fully mined, no one can fully pinpoint what the nature of the global crypto economy will be.

Moreover, demand and supply of Bitcoin will always determine the price. This is because its overall existence is a decision-making process. As long as people will still want it like they do today, volatility will still remains a factor in the Bitcoin's market, albeit not as strong as it today. But, until then, let's enjoy the game of Bitcoin's volatility.

Posted using IceBreak