Is slowness of bitcoin make it's price less volatile?
Right before Christmas the price of bitcoin (and many other cryptocurrencies) noted significant fall. From 20 000$ at the top few days ago to almost half of this value. This rapid price reduction caused huge increase in bitcoin transfers. This is due to two facts:
- On some exchanges the price was falling faster than on the others. People wanted to trade between those exchanges (arbitrage).
- People holding their bitcoins on external (private) wallets were worried about the situation and transferred their savings to exchange so they can sell their bitcoins not to loose any more value.
As a result slow network of BTC has congested pretty much, miner's fees increased and transfers were reaching destinations with huge delays. Traders were forced to use only those funds they already had on the exchanges, not those on their wallets. When transfers finally arrived the drop of the price was already finished and bitcoin was regaining some upward momentum. This surely stopped many investors from selling their coins in panic and reducing the price onwards.
To summarize the slowness of BTC network (scaling problems) stabilised it's price. It's quite specific feature of this currency which may cause it to better preserve it's value. It's hard to determine where the dip would end if the transfers were reaching exchanges immediately. This confirmed again that bitcoin is in it's actual form a digital gold rather than digital currency. Even though I would definitely rather like to have efficient BTC network, maybe it's slowness isn't always a flaw...
No. Slowness of response would be more likely to increase volatility. People who are anxious to ensure a sale or a buy are more likely to widen their sell or bid price in order to ensure the successful closure of the transaction.
But you cannot place any offer without a funds on your exchange account. You can sell only what you have there and then you are out of coins. You come to a situation of being oversold much quicker (selling less volume of coins). Note that FIAT money remains limited on the exchange - no matter if BTC transfers are fast or slow. The difference is the amount of coins being sold. Fast BTC transfers would increase number of coins present on exchange rapidly without increasing FIATs - reducing BTC price as a result.
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