"This brings up the question of what a good price for Bitcoin would be. When will Bitcoin stabilize? It should become less volatile as it becomes more widely adopted because it will be harder for local events and individual people to affect the price very much, right?
Not necessarily. Although perhaps we will see less wild daily swings, I think Bitcoin is unlikely to ever attain anything like a stable price. If Bitcoin’s price were stable, this would mean that it had achieved an equilibrium with the other currencies. There would have to be some sweet spot at which there is exactly the right balance of bitcoins and dollars. When Bitcoin’s price went a little bit too high, people would start to sell for dollars, and when it went a little bit too low, people would buy more bitcoins.
To anyone who thinks this is possible, I ask why would any equilibrium happen? What would it possibly mean for Bitcoin’s price to be too high? Unlike just about anything else, a higher price for Bitcoin does not reduce its usefulness one bit. One simply trades in smaller amounts of it. In fact, a higher price makes Bitcoin more useful because a higher price indicates that more people want to buy, which means that Bitcoin’s liquidity grows, which makes it more useful as a currency.
Therefore, I would suggest that we should never expect an equilibrium between bitcoins and dollars or any other currencies. Instead, Bitcoin should show a pattern of hypermonetization. It will become more and more valuable at a faster and faster rate priced in terms of other currencies. Its price chart should show an asymptotic increase that approaches infinity after a finite time.
Bitcoin may stabilize in terms of real goods, but I see no reason to think that it will stabilize in terms of other currencies. Once Bitcoin starts killing the other currencies, it will still be volatile, and this will still be an indication of its success.
If my prediction is wrong and Bitcoin ever stops being volatile, that might be a good time to dump it."
Source: https://nakamotoinstitute.org/mempool/i-love-bitcoins-volatility/
What do you think?
No comments:
Post a Comment