The article discusses the volatility of bitcoin and its potential causes. It highlights that bitcoin's price has experienced significant fluctuations throughout its history, with examples of both high short-term jumps and drops. Some attribute bitcoin's volatility to its youthfulness, suggesting that as it becomes more established, volatility will decrease. However, the article also notes that even long-established assets like gold still exhibit volatility. It explains that demand fluctuations play a significant role in asset volatility, and while the supply of gold can increase to some extent, bitcoin's supply is more limited due to its mining process. The article explains that the difficulty adjustment algorithm in the Bitcoin network further limits the correlation between increased mining resources and increased production. Overall, the fixed supply schedule of bitcoin means that its price will always fluctuate as long as demand fluctuates. The article also addresses the criticism of bitcoin's volatility, noting that while it may hinder its use as a common medium of exchange, other features of bitcoin, such as divisibility and privacy, may compensate for this drawback. The article concludes that bitcoin's volatility has its upsides as it keeps the attention on bitcoin and attracts new users. The author highlights that bitcoin's creator, Satoshi Nakamoto, deliberately chose volatility over a pegged value or a supply adjustment mechanism.
- Content Editor ( forbes.com )
- 2024-09-25
Bitcoin’s Volatility Is Its Strategic Edge