A few days ago Ryan Galt – blogger, entrepreneur and a freelance writer shared his own speculations on the origins of the cryptocurrency’s volatility and ways to overcome it.
Ryan starts from afar, remembering a time a few weeks ago, when the BTC price was relatively stable and media sang of the Bitcoin’s prosperity. The stagnation was not for long though, as Mt.Gox, the first of the major international Bitcoin markets, began its notorious downfall.
The BTC price dropped significantly on Gox and soon the infection spread on other exchanges. Due to DDoS attack coupled with a double-withdrawal tactic, the Bitcoin markets’ work was severely slowed or in some cases stopped until the problem was fixed.
After the short background, Ryan stated that Bitcoin fails as currency and proceeded with explanation.
In his opinion the main problem of cryptocurrency is the duality of its use, meaning that people tend to use it as a valuable asset, an investment of sorts, similarly to gold, while at the same time trying to pay for the goods and services with it.
Writer’s point is simple. A customer is used to the familiar currencies that they were using their whole lives. You know, a little inflation, stationary prices, not the wild fever of BTC price going up and down 10% every single day. However, for those who use the Bitcoin as speculative investment the slow deflation of the crypto’s price is the only thing that matters. This kind of Bitcoin holders have no interest in actually paying for something with digital coins. No, the only reason they fill up their wallets is to wait until the exchange rate is high enough to get reed of the crypto and move on to another tasty piece of investment.
As you can clearly see, at this time, Bitcoin cannot perfectly fulfill the role of money. However, its value is purely virtual. In case people would stop making the transactions, the demand for the Coin will be nil and its price will fall down with the speed of a meteorite. So, investment, the area where Bitcoin actually works, is based on it playing its lousy role of currency. Ryan sees this connection as “peculiar” and, well, I couldn’t agree more.
What Ryan believes is that next logical step for the digital coin is not the gimmicks like apps or PC software but a system that would somehow divide the two-fold nature of Bitcoin into separate entities.
The support of banks may serve as well, because the battle-hardened economic giants could provide security and guarantee that your digital wallet would not turn from the asset into a worthless compilation of ones and zeroes. Ryan sees the wolfs of Wall Street (yes, pun definitely intended, not a quote though) as the main support for the future of Bitcoin, as that environment has a lot of entrepreneurs and talented financial engineers that would be able to create and manage the required solution.
In the end, the writer answers the question posed in the heading of this article with an observation that the only matter now is time but not the fact of an existence of such a solution.