0 sats \ 23 replies \ @kingzing131 26 May \ on: The Paradox of Bitcoin Adoption bitcoin
Any securities, commodities and assets can be a trading pair, so volatility will always exist even if fiat is gone completely.
Bitcoin supply side volatility is built in with the hard cap and halvening.
But it's not impossible to it becoming more stablised if the properties become more appreciated and accepted as gold.
The bigger risk imo, is early nations that adopt Bitcoin enmass, is most vulnerable to speculative attack.
Before you say but it's no good for any one, this has already happened in 1997 Asia financial crisis.
I agree completely, the thing is that bitcoin now is treated as an asset, but adoption implies that it starts being treated as what it's intended for: being a currency. No base currency is volatile against itself, for 1 USD = 1 USD, but only prices measured in that unit are considered to be volatile (even if it's the fault of the mismanagement of the currency itself). The same is pretended for bitcoin when we refer to "mass adoption". There is nothing like a "mass adoption of a specific asset", for we can't pretend that every person in the economic web haves to buy a house to use it as currency for every exchange. Gold became an "asset" when the gold standard was abandoned, prior to that gold was the currency in itself, and currency units were determined as fractions of gold units. Nixon did so much damage...
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the stability against itself doesn't mean much since it is a medium of exchange.
It is what the exchange value that matters.
It will be one bad currency if it made everything else volatile.
Volatility is not necessarily better than depreciation, all depending on the rate in each.
As a tool, the more predictability, the better you can hedge/build around it.
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Stability against itself means the most important thing: that it's a currency. Bitcoin volatility means that's not a currency, and the fact that the problem worsens the more we try to make it a currency is what the paradox is about.
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I am a bit confused. 1usd is 1usd. 1 Zimbabwe dollar is 1 Zimbabwe dollar.
That don't matter.
Volatility is it against everything else.
As long as it's on the market and demanded, it will have an exchange rate/trading pair.
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It's the opposite. It's the thing that matters the most, as long as the purpose of bitcoin is to be a currency.
1 usd is 1 usd as long as it's a unit of account. When it stops having that property, 1 usd will be equal to anything else judged as a better parameter. The example is any country where the national currency is broken. In Argentina, NO-ONE measures prices in ARS (Peso), but 1 ARS = X USD , because the unit of account is the USD, not the ARS . No one cares that 1 ARS = 1 ARS, because it's not a unit of account anymore.
Volatility is against anything else, but it fixes one of both elements to judge how the other moves. The one fixed, is the currency. You do not measure the value of the USD in houses. You measure the value of a house in USD. When you buy a house, you don't ask yourself how many houses you will need, you ask yourself how many USD you will need. When you sell a house, you don't ask yourself how many houses you will get, you ask yourself how many USD you will get. From the pair, only one of the elements is the clear parameter, and that's the unit of account, i.e. , the currency. As far as bitcoin is not a unit of account, thus 1 BTC = X USD, it will not be a currency. Only when it gets there, 1 BTC = 1BTC .
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That's a lot of concepts mixed up, and not quite right.
For all intent of purposes here, 1 X = 1 X is always the case, because that is pairing X with X.
If your point about "1BTC = X USD" exist, thus it isn't a unit of account, thus not a currency, and so "1BTC =/= 1BTC".
Well, then vice versa, a equal sign implies both way conversion. USD is not a currency because 1USD = X BTC"?
If you think it is cheeky then:
Why is HKD a currency, if it is pegged to USD?
Or Simply look at the FX market, where it is all trading pairs
Your argument is more on:
People treating BTC as the sole local currency, and therefore it wouldn't be considered as volatile, because everyone think of BTC as what they will get.
This is wrong.
Volatility do not become stabilized by it being unit of account.
Volatility will always exist because the exchange value of any currency doesn't come from daily trade, it is from FX trading and central banks.
People do think about what they can do with that "money" when trading, and that means the money has to be stable to be good unit of measurement.
We do that with fiat to bitcoin. Argentina do that with ARS to USD.
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I can only repeat again what I said, because you did not disproved my point, only forked the discussion to something different: here we are discussing the paradox in the process bitcoin of becoming a unit of account, not how exchanges work. You can use anything for exchanges, yes, that's obvious. That's not in discussion. What's in discussion is how to arrive to bitcoin being a unit of account. That's the key concept absent in your observations. Of course I know that 1 X = 1 X, you are missing the point right then and there on why the expression 1 BTC = 1 BTC is used: it's an euphemism of bitcoin becoming a unit of account. For as long as from the trading pair the part fixed for reference is not bitcoin but USD, USD is the unit of account, not BTC. Yes, again, I know you can invert the equation, but that's not what's done in practice, you can't deny that that's how the market works: in real life, you take one side as parameter.
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It's important to get the base line right and that we are in mutual agreement of what is actually discussed here.
What you refer to as 1BTC = 1BTC is essentially: BTC become a standard unit of measurement for common trade.
The argument I have is, having 1BTC = 1BTC (the default standard unit of measurement) will still be volatile because everything else would be volatile.
One example is how hyper inflation causes the merchant to keep updating their price.
This isn't limited to hyper inflation, but high volatility as well.
And that's really it.
The volatility will not be better even if BTC become the sole currency / unit of account of the nation.
A trade is a mutual trade that provide value to both parties. eg a trade of a bitcoin for a house, is a trade for and from bitcoin. It is not a one way thinking like you implied.
A trade is a trade of value. If one side is extreme volatile and you fix it as the unit of measurement, then the other side has to adjust accordingly to maintain that equal exchange of value.
For the seller of the house, he/she has to consider what the bitcoin value is, same for the buyer of the house, because he is trading in for the Bitcoin.
As for whether bitcoin will become more volatile as it gets adopted as the sole unit of account in a nation, it's possible, but hardly important when 97.5% of currency transaction (and thus value) is from FX trading.