Volatility is bad for business, bad for bitcoin
I just finished reading a very interesting report by the Federal Reserve Bank of San Francisco. What they did was analyzed the data to find that bitcoin futures have allowed pessimists to bet on the market. In fact, they note that up until December 17th, only the optimists could speculate on Bitcoin.
Since then, there have been wild swings in the price of bitcoin, but none so wild as the drop off from December 17th highs down to the current price of around $7500. Check out this chart from CoinMarketCap:
It would seem to me then, that the trading range has narrowed. Speculative demand has achieved some balance with the bulls and the bears. But more to the point, speculative demand has met, and is starting to give way to, transaction demand.
I know someone who runs a very successful business. I asked him about Bitcoin. He laughed and said, "Volatility is bad for business." He had been following the story. He's interested, but doesn't know enough about it to feel comfortable investing.
For those who seek, even glorify bitcoin dominance, you're not going to have a useful currency if bitcoin keeps going up. And down. and up again. John McAfee isn't going to see $1 million bitcoin if the bitcoin bears have their way.
The gold fans will tell you that the reason gold is so useful as a medium of exchange is that it is stable. A medium of exchange must be stable to be used as a currency. Otherwise, people will hold the currency in anticipation of greater value, like in a period of severe deflation. If the value of bitcoin is perceived to be stable, people will circulate it by spending it and accepting it for payment, instead of holding it.
Given enough time, the bitcoin futures market could have a very stabilizing effect on the price of bitcoin and allow transaction demand to develop to the point where bitcoin becomes a lot more useful as a medium of exchange.
Hopefully, the people who made bitcoin futures will also create other futures markets for other coins to help stabilize their prices, too. This would allow more people to use cryptocurrency as a medium of exchange, rather than just a store of anticipated speculative value. The bitcoin futures market could be just what is needed to allow a smoother transition to cryptocurrency as the default medium of exchange.
A basic guaranteed income in the context of Maslow's Hierarchy of Needs
A sort of political movie review: Star Wars: Rogue One
Happiness isn't getting everything you want - happiness is a skill
The opposite of love is not hate, it is apathy
Fate, impunity and altruism
Thanks to the lightning network 2.0, the fees of using bitcoins have drastically decreased. That should help mass adoption.
Thanks for your comment.
But I wonder, Steem has zero fees, low transaction times, and it fluctuates quite a bit, too. I don't see that mass adoption is happening for Steem yet.
As to the Lightning Network, do you think that eventually, the Lightning Network will ever bump up against a bottleneck at the original Bitcoin blockchain? I have some reservations about this Lightning Network as I think it increases the attack surface of the currency.
I haven't studied it all that much, though. I am just not sure how adding another layer to transaction processing is going to help in the long run.