Bitcoin Is Entering the Next Phase: Stability!
One of the key criticisms against bitcoin and similar digital currencies is volatility. Contrary to traditional "paper" equity markets, bitcoin volatility is nothing short of extraordinary. Proponents will rightly argue that the choppiness is necessary to provide rich rewards for traders and speculators. Still, if bitcoin could be more stable valuation wise, it would take the next step towards full global acceptance.
(This article originally appeared on Crush The Street -- https://crushthestreet.com/articles/breaking-news/bitcoin-entering-phase-stability)
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With a time of writing price of under $2,500, bitcoin is again worrying both recent investors as well as hardened veterans. If traction doesn't build quickly, it's likely that the weak-hands will panic out of the cryptocurrency markets, thereby engendering a wider sellout. Should that occur, there's no telling where the value of bitcoin would end up.
Fortunately, strong signs exist that confirm bitcoin's maturity as a cryptocurrency asset. Indeed, the day when digital currencies are accepted as international legal tender is now more likely to be upon us than not.
Average Upside Volatility Rising
Critics will often blindly criticize bitcoin as being too volatile of an investment. While that's true, did you know that the average, week-over-week volatility in bitcoin is rising in your favor?
Since 2014, bitcoin's weekly volatility (using a base-10 logarithmic chart) increased from a lowly -0.04% to the current, year-to-date rate of 0.07%. What that tells us is that bitcoin has a slight bullish edge, meaning that it's more likely than not that your purchases this year are profitable.
"Reasonable" Downside Risk
During the early years of bitcoin and the cryptocurrency markets, it was not unusual for investors to see massive gains, only to be followed up by equally massive losses. While speculators live for this type of "opportunity cycles," the regular Joe can be turned off by it.
Thankfully, bitcoin is becoming more stable to the downside. Based on its logarithmic weekly price data, the worst volatility this year was a -2.3% hit. Compare that to a -585% hit in 2011! You can clearly see that bitcoin is becoming a stable cryptocurrency platform.
Extreme Speculation Declining
Bitcoin got its start through extreme speculation, which is a big reason why the mainstream is talking about it today. However, that era is on the decline, and what is replacing it is a period of maturity.
We can determine this because the maximum and minimum volatility of bitcoin is becoming increasingly tighter over the past few years. This implies that we will enjoy modest gains as well as modest corrections, and thereby, eliminate the circus act that turned off early investors.
Bitcoin and stability:-
The collapse of Mt. Gox, a large Bitcoin exchange based in Japan, did roil the Bitcoin world. Mt. Gox tried to blame its downfall on the Bitcoin protocol, but it was actually the exchange’s inattention to the protocol that caused its problems. If a large U.S. bank collapsed as a result of poor accounting and bad cash management, few would see cause to argue against the U.S. dollar; likewise, assessments of Bitcoin’s role in monetary affairs should be based not on Mt. Gox but on the protocol itself.
The Bitcoin protocol can be thought of as a global public ledger optimized for value transfer. Anyone can add entries to the ledger, known as the “blockchain,” and nobody can erase them. Cryptography secures assets recorded on the ledger and ensures its integrity. This system allows people and businesses to transfer value directly and globally, without the interference of a third-party intermediary.
The amount of Bitcoin that can be created is limited by the protocol itself. Bitcoin’s mild inflationary policy is governed by math that can’t be changed without an amendment to its software, which requires the consensus of the Bitcoin community. This gives Bitcoin investors confidence that no monetary authority can debase their assets.
it's been stable around 2500 lately
this is great news for Bitcoin! Love it! Keep stacking!
Yeah, I think it's all part of the broader normalization process for bitcoin and the cryptos!
I need these coins to be on sale 😬😂
Yeah, they are on the "open market" but not necessarily on the "internal market."
I like to think when a stock price drops the stock is on SALE! And I always like to pick up a good deal when I see one. I think Bitcoin is currently undervalued and stability will come with countries adopting it as a legal currency. It might be wishful thinking.
Of course, risks always abound, but I don't think it's wishful thinking, FWIW. Bitcoin is entering into the broader acceptance or normalization phase, and that means the retail masses will start pouring into the cryptos. Longer term, I see a big time potential for bitcoin!
I wrote this wicked post today and it got not much love. Is there a best time of day to post blogs? You have a high number there so you must know the answer. : )
Technically, no, but it's best to post something inside the time zone which features the most whales ... I'm assuming this is the USA.
And if by "love" you mean rewards, then your posts are almost wholly dependent upon the whales. If the whales like what they see, they will make all the difference for you. Otherwise, you will need thousands of minnows upvoting you.
Nice analysis. A decrease of volatility coupled with an expectation of a decent return make a great investment opportunity.
Yup, I couldn't agree more, plus, it makes it more palatable for regular folks to invest in bitcoin.
Top notch analysis here. I really like the piece on less speculation throughout the Bitcoin market and more dependence on real use cases. The recent adoption of BTC by Japan and the building of regulations across the world will only help to bring legitimacy to not only Bitcoin but cryptocurrency as a whole. I am great looking forward to what the future brings for BTC and crypto!
Thank you as always! I know I must sound like a broken clock but I genuinely believe that the cryptos are becoming normalized -- the more people talk about them, and witness their friends and family invest in them, the more "real" it becomes.
The Japan deal is huge, and other international and corporate developments are moving along in the right direction. My gut tells me that the next few years will be mind-blowing for bitcoin, cryptos!
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Darn! I hate being undervalued! :)
BTC just dragged my coins down.
I am just patient, more worried about the exchanges rather than the coin @bullishmoney
I didn't really think about that , but now that you mention it, I've heard stories about delays at the exchanges ... you're right, that's a bigger problem than the cryptos.