I have read some posts and some concerns that it is the volatility of Bitcoin that is preventing many people and many businesses to fully adopt Bitcoin. This can be the main factor why big online shopping stores are not yet adding Bitcoin into their payment facilities (though there is now a circulated petition for this but I doubt if it can make a dent).
Some are really saying that if volatility can be managed then we can see Bitcoin going mainstream. I am wondering then: Is volatility something that we should find a way to control and how do you think it can be done?
It could definitely be controlled.
An example of this would be, say we have a bitcoin stability fund that holds half of its assets in bitcoin and the other half in USD. The fund has to be quite large, at least $10 million to make bitcoin really less volatile. The idea is simple, if bitcoin goes up, then the bitcoins are sold to offset the rise and bring bitcoin back to its normal resting level. And bitcoin goes down, the USD is used to buy into bitcoin causing a rise.
However, this is only going to centralize bitcoin. And that's not something that anyone wants in my opinion. And bitcoin should be volatile, it's actually quite attractive to investors this way. If bitcoin is pegged with USD all the time, then whats the difference between bitcoin and USD?
The idea of creating such a fund is perhaps the only way to eliminate the volatility of bitcoins. This is practically one of the main functions of Central banks in a particular state for national money. Therefore, although this idea is not new, but probably the most effective one. However, in this regard, a lot of questions and problems arise. Immediately the question arises: who will create and from what funds this fund and who will control its work?
It seems to me that the creation of such a fund will be very problematic, since many will see this as a threat of centralizing bitcoin. I think that with the increase in the cost of bitcoin, its volatility will also increase.
You forget the amount of this funds is lower than the total market cap of Bitcoin in the market.
$ 134.677.683.934 is the market cap of Bitcoin at current.
10 million dollars can help the whale control a small market like a small exchange, example Poloniex, I think that amount can control the price of Bitcoin in Poloniex exchange in short time.
But if the whale want to control the price of Bitcoin in all exchanges, I am sure this plan never create by a trader, it needs to creates by many rich Bitcoin trader are the whale in the market.