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Why Bitcoin Volatility is a Myth

Posted 17 November 2017 Why Bitcoin Volatility is a Myth
Written by Jon Gulson @jongulson
For every action, according to Isaac Newton in his third law of physics, there is a reaction. One of the world’s foremost and brilliant scientists – and later in life, Warden of the Royal Mint – knew seeking truth requires more than scratching the surface.

Centuries later, Satoshi Nakamoto’s brevity meant he didn’t need to detail the history of money when outlining it's future. For if he had, he’d have described the problem faced by Newton in the Great Recoinage of 1696 – that an estimated 20% of coins taken in were fake.

Which leads us to the one of the great myths of our times: bitcoin is too volatile to be a stable store of value.

Sound Money

Sound money is based on the concept of holding value. Except today, when considering the macro-economic environment; there is a problem: the rate of return on money is less than the rate of inflation. Meaning the dollar – a euphemism for fiat currencies around the world – is not a stable store of value at all.

Don’t Demonise the Dollar

Bitcoin began life as a vision for a peer-to-peer digital cash system, without need for dispute mediation (the fraud problem). The irony being bitcoin is making headlines because of volatile dollar price movements on bitcoin exchanges; but it is not bitcoin itself which alters: bitcoin’s hashing algorithm, deflationary issuance, irreversibility, proof of work blockchain and non-Turing completeness remain unchanged. 

The only thing changing is the dollar price action, a result of speculation: the dollar’s utility has worked well for many years, but don’t believe fiat currencies last forever. On average, every thirty to forty years the reigning monetary system changes.

Bitcoin is involved and difficulty inbuilt. The reaction that ‘bitcoin, it’s too volatile to be money’  not only ignores bitcoin’s fundamentals, but also the flailing state of the dollar. As Newton said, for every action there is a reaction. The action now being an evolved and digital logic.
Written by Jon Gulson @jongulson
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