Look, for instance, at the relationship between silver and gold. Since they have become so securitized they seldom behave independently silver has been relegated to a beta trade for gold since there is a rather sticky ratio between them. Since they are correlated in this way they share similar risks, demand for one often results in a price move for the other even if it is not directly related.
It seems to me Gold and silver are sticky because they are in effect the same thing a "precious metal" used as an investment. In the US when Silver was used instead of gold its value was largely determined by the economy, and it was used in place of gold or as a cheaper substitute, I would guess, its original primary value came from its utilitarian applications and only over time did substitutes take its place. I would understand that only after the normalising of global economies and after the introduction of fiat did gold and silver become sticky, I imagine when on the gold standard, a state could still inflate the money supply by introducing silver coins, independent of gold reserves.
Then, look at the once traditional relationship between bonds and stocks, where they shared a negative correlation, as one goes up the other would go down, depending on what part of the business cycle we are in.
An economy that has fully recovered from the Keynesian business cycles and market mismatched cycles of the free banking era, will not need an offset investment vehicle like stocks and bonds to preserve wealth. So we don't need the offset investment, the economy is the offset investment. (the volitility is an adoption problem)When there is an accelerated growth cycle in the economy, it needs consumer prises to deflate for effective self regulation, and likewise if investment in the economy is needed inflation is the most appropriate stimulus.
The only problem I see with the adoption of Bitcoin is deflation in the Bitconomy is in effect inflation in the adoption cycle. It seems to me this is "the paradox of thrift" at work and the result is volatility.
One proposal I have seen that could help to enforce such a separation is the concept of a proof of stake, providing a separate market for tokens that basically give you a right to mine
I like the stake to mine idea too this could also work to prevent a brute force attack on the network, and would also function as a futures market for mining, when the price goes too quickly futures are sold to mine the new coins, stabilising the market, I think the creative challenge is to build it into a single system so you don't have 2 markets. It may also be possible to tie the proof of stake "futures , or options" creation to the difficulty to regulate distribution. A brain fart - could proof of stake option be created similarly to mining but for the service of providing an up-to-date blockchain nodes, (regulated by disk space) - created and sold by all users while coins are created by miners (regulated by CPU),
Another sink could be between Bitocoin and alts with different inflation schedules, providing a kind of slow moving inrease/decrease in correlation. To see how this would work, think of how alts with identical inflation schedules would be correlated, from there it is not such a stretch to see how instruments with different inflation schedules would interact to break up that correlation.
You have articulated my exact thought, I don't like the idea of messing with a Bitcoin fork though, I see Bitcoin as the feature rich development platform with all the benefits and the alt coin with different inflation schedules, lagging in feature years behind, and during the vast deflation periods in the Bitcoin Economy people may switch to the new system without the disadvantage of being a late adopter. 20 or 50+ years down the line the 2 system may eventually become sticky and run in parallel, if thing went wrong the market could favour one over the other.
