The BIS has attributed the volatility of bitcoin to the lack of a central bank

audaciousbeing

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Quote from: alyssa85 on April 30, 2019, 08:31:28 AM

https://voxeu.org/article/some-simple-bitcoin-economics

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According to a Financial Times article from June 2018, the Bank for International Settlements (BIS) traces the instability of crypto-prices back to the lack of a crypto central bank. The fact that the value of Bitcoin is not controlled by a designated central bank constitutes a major difference to traditional currencies.

The US Federal Reserve Bank, for instance, injects or withdraws dollars from circulation in order to meet its policy goals such as a stable rate of inflation. The supply of Bitcoin, in contrast, evolves due to decentralised computing activities of 'miners' and can only increase over time. Therefore, a traditional tool for promoting price stability is unavailable for cryptocurrencies. The BIS addresses 'unstable value' as one major challenge for cryptocurrencies for becoming major currencies in the long run.

I personally think the volatility is because so few are trading it. The more people trading a currency, the less likely a single person can move the price either with a pump or dump. It's very hard for a single actor to move the dollar against another currency for example because they'd need huge firepower.

Unfortunately trading volumes have decreased since Dec 2017, so the volatility will remain.

I won't disagree with them to a large extent because there is an element in it. The fiat we know is able to remain relatively stable because of government interventions and these are not in small effort. The effect of this was obvious sometimes in a country where government decides the forces of demand and supply of the market determine the exchange rate, within a few month, the entire economy was in shambles and the local currency losing its value really fast. Putting it in perspective is the local currency depreciating against the USD by 10% everyday until the government decides to intervene by pumping forex into the market in other to keep the effect at bay and they are still doing it.

You are also not wrong that when bitcoin is fully traded the volatility can be nipped but really that is a long way down if there is a body established to ensure that the balance is maintained because the market cannot be trusted in the hands of individuals and capitalist to the detriment of other members of the society.

el kaka22

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This is not even a bad argument, I mean he says it like its something bad but in reality its actually something very very good for us. Yes, the volatility is a price we have to pay for lack of a central bank but at the same time its something we agree that instead of having a central bank we should just let it be volatile and that way we can at least not have some organization control the currency instead of us.

Nations literally let central banks control money for them and we have seen what has happened to all national currencies, most of them are horrible and the ones that are not horrible are still worse than what they used to be. That is why I honestly believe that I am definitely in support of having no central banks and just keep getting ups and downs all the time.

binhvo1505

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Quote from: alyssa85 on April 30, 2019, 08:31:28 AM

https://voxeu.org/article/some-simple-bitcoin-economics

Quote

According to a Financial Times article from June 2018, the Bank for International Settlements (BIS) traces the instability of crypto-prices back to the lack of a crypto central bank. The fact that the value of Bitcoin is not controlled by a designated central bank constitutes a major difference to traditional currencies.

The US Federal Reserve Bank, for instance, injects or withdraws dollars from circulation in order to meet its policy goals such as a stable rate of inflation. The supply of Bitcoin, in contrast, evolves due to decentralised computing activities of 'miners' and can only increase over time. Therefore, a traditional tool for promoting price stability is unavailable for cryptocurrencies. The BIS addresses 'unstable value' as one major challenge for cryptocurrencies for becoming major currencies in the long run.

I personally think the volatility is because so few are trading it. The more people trading a currency, the less likely a single person can move the price either with a pump or dump. It's very hard for a single actor to move the dollar against another currency for example because they'd need huge firepower.

Unfortunately trading volumes have decreased since Dec 2017, so the volatility will remain.

I don't think Bitcoin is considered a coin that is traded by few people during the day. One day bitcoin has more than $ 14.7B in transactions and you say it has low volume?
The great upheaval that took place is because the manipulation has not yet been punished and organizations are constantly manipulating it to their advantage.

Tylev

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Quote from: Beerwizzard on April 30, 2019, 09:17:37 AM

That's not really about the amount of traders but about the trading volume and market cap. No matter who is regulating the market but until for example the market cap is only 1$ nothing can ensure that tomorrow someone won't buy it for 2$ and make this currency extremely volatile. First you need to get a mature market and only then you can think about the ways of regulating it.

It is unlikely that an increase in the number of participants in the cryptocurrency market will be able to affect it in the direction of decreasing its price volatility. The main factor here, as in regular currency, nevertheless remains the lack of price regulation, which is carried out by central banks with regular currency.
Cryptocurrency price volatility is its main advantage and at the same time one of the main disadvantages. While we do not know which way cryptocurrency will go.

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Quote from: magneto on May 21, 2019, 02:41:07 AM

It's probably partially true, but it's certainly not the major factor in this case and also, not a detriment but rather a benefit of bitcoin in my opinion.

You really need to look no further than precious metals to find an counterexample of an asset class that has been extremely stable, more stable than even the majority of fiat currencies around the world, yet operates without a centralised entity that manages the circulating supply of gold or silver, nor the interest rates associated on them. Furthermore, bitcoin is without a central entity *by design*. Would you rather have a currency that is a long term store of value but fluctuates in the short term, or one that will depreciate in the long term but seems to be 'stable' in the short run? Stability is relative, after all.

At the end of the day, I think as others have said, the size of the bitcoin market and the fact that it's still used for investment purposes mostly contributes to the volatility of BTC, not the fact that it doesn't have a central bank underlying its structure.

they actually know, but it still takes time to realize and improve it. with the potential that is happening now, of course bitcoin is very suitable for investing. especially with users who are still very few, so the opportunity is still wide open

magneto

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It's probably partially true, but it's certainly not the major factor in this case and also, not a detriment but rather a benefit of bitcoin in my opinion.

You really need to look no further than precious metals to find an counterexample of an asset class that has been extremely stable, more stable than even the majority of fiat currencies around the world, yet operates without a centralised entity that manages the circulating supply of gold or silver, nor the interest rates associated on them. Furthermore, bitcoin is without a central entity *by design*. Would you rather have a currency that is a long term store of value but fluctuates in the short term, or one that will depreciate in the long term but seems to be 'stable' in the short run? Stability is relative, after all.

At the end of the day, I think as others have said, the size of the bitcoin market and the fact that it's still used for investment purposes mostly contributes to the volatility of BTC, not the fact that it doesn't have a central bank underlying its structure.

coinplus

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WHAT A SHOCK! Of course the volatility is based on the lack of central bank. We are fine with the volatility and increases and decreases of bitcoin because there is no power that controls bitcoin for us and we (literally "we" as in all people) control the market ourselves. There is no way we need to keep going up for shareholders, there is no way we keep doing something illegal to profit ourselves as a whole, there is no collective shady business going on to get ourselves rich while saying screw everyone else. Central banks do all kinds of dirty stuff and when they keep the economy at bay they are doing it for themselves not for us. This is exactly the reason why we love bitcoin and we are fine with the causality of volatility when it comes to going up and down frequently.

Ucy

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Centralized bank for bitcoin means they will be able to print bitcoin as much as they want. They could also censor transactions, make stuff less transparent and possibly remove immutablity.

Or they probably looking for more effective tools to keep prices stable?

Marry Finch

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I agree with the Bank for International Settlements that the volatility of a cryptocurrency is related to the absence of a central bank or other body regulating its price. Moreover, if the national money of the states did not have such bodies regulating their price, then their price volatility would not be as high as it is characterized in cryptocurrency. The national money of the states is nevertheless tied to the state of the country's economy and therefore their volatility cannot be large anyway. Cryptocurrency does not have any limitations in its price at all, its price is determined only by the ratio of supply and demand, and these indicators are completely unpredictable.

STT

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We need the volatility now to really be able to make money through it,

Volatility is actually destructive because it discourages genuine exchange by large price differences over short periods of time. If we are wanting BTC to be its own currency with prices quoted in BTC not just dollars and transmitted briefly via BTC then its needs to be more predictable

Ive read a few times recently the IMF will link SDR and XRP to allow crypto exchange of FIAT that way. I dont know theres any truth on that specifically but IMF has spoken about crypto or blockchain technology being a valid future direction.

As stated by BIS I doubt they ever allow or trust a stateless unbound crypto blockchain to be used as a reserve asset for national banks or anything like that. FIAT is based around political advantages and alliances between countries and those leaders think this is very much a positive while its under their control.
Iam biased towards capitalism which is power and value with the people even the smallest earners numbering in the billions and who are the real economy not the politics and false value attributed to political debt.

When BIS criticises BTC in this way they are just showing themselves to have different objectives to capitalism, to the common people and to plain business.

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Quote from: CryptoBry on May 09, 2019, 12:33:32 AM

Quote from: dothebeats on May 02, 2019, 07:32:11 AM

Volatility will never be removed on bitcoin and crypto and we certainly don't need any central banks to control the flow of coins in circulation and the value of each coin as well. That's the beauty of a decentralized, deflationary currency: it cannot fail since it has no central point, but volatility is also a boon of cryptos as due to this, merchants can't meddle with it, more so accept it on their platforms as a form of payment. Should they accept it, they still need an intermediary to ensure profits which basically just removes yet another portion of the profits, too.

Having a central bank to control Bitcoin will make it just another fiat money...it maybe can solved the extreme volatility happening from time to time but will make it controlled by few people and therefore going against its very nature. As in anything man-made, there can be advantages as well as disadvantages depending on someone's views of things and that is the same thing with Bitcoin. In my take, this is a free marketplace so we let Bitcoin be volatile though I am welcoming regulations to make sure that all players are behaving well and not doing shenanigans that can undermine the trust and confidence of investors and traders.

I agree to let bitcoint stay in its original nature. with a system that contradicts the current system, I don't think it is an obstacle to being able to use it according to its function. so that the community can judge between the two systems, the advantages and disadvantages

CryptoBry

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Quote from: dothebeats on May 02, 2019, 07:32:11 AM

Volatility will never be removed on bitcoin and crypto and we certainly don't need any central banks to control the flow of coins in circulation and the value of each coin as well. That's the beauty of a decentralized, deflationary currency: it cannot fail since it has no central point, but volatility is also a boon of cryptos as due to this, merchants can't meddle with it, more so accept it on their platforms as a form of payment. Should they accept it, they still need an intermediary to ensure profits which basically just removes yet another portion of the profits, too.

Having a central bank to control Bitcoin will make it just another fiat money...it maybe can solved the extreme volatility happening from time to time but will make it controlled by few people and therefore going against its very nature. As in anything man-made, there can be advantages as well as disadvantages depending on someone's views of things and that is the same thing with Bitcoin. In my take, this is a free marketplace so we let Bitcoin be volatile though I am welcoming regulations to make sure that all players are behaving well and not doing shenanigans that can undermine the trust and confidence of investors and traders.

tweetbit

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Central bank 🏦 as a possible solution to a volatile crypto currency is a bad idea and the worse scenario that will happen to bitcoin. It will end its purpose and be controlled over by the financial elites and the government. We won’t want that to happen.

I’d rather have a volatile bitcoin in many years as it exist than give the opportunity for the greedy to manage and regulate it. It would be a game over move and Satoshi Nakamoto’s vision about anonymity will all go to waste.

Netnox

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Quote from: alyssa85 on April 30, 2019, 08:31:28 AM

I personally think the volatility is because so few are trading it. The more people trading a currency, the less likely a single person can move the price either with a pump or dump. It's very hard for a single actor to move the dollar against another currency for example because they'd need huge firepower.

Unfortunately trading volumes have decreased since Dec 2017, so the volatility will remain.

I have just the opposite opinion. IMO, the volatility is quite high, because too many coins are being traded. Look at the exchange volumes. During the past 24 hours, more than $15 billion USD worth of BTC were traded in the exchanges, and it represents close to 15% of the total market cap. Now compare this to gold. The total market cap is close to $7 trillion, and out of that the daily transaction volume is only around $100 billion. I believe that this is one of the reasons why gold is less volatile than BTC.

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Quote from: justspare on May 01, 2019, 01:28:47 PM

We need the volatility now to really be able to make money through it, when bitcoin speeded up to almost $20,000 in the last bull, if the market had not fallen back, would there have been chance for holdlers now to buy and become rich in future ? Even if BTC will become stable, let it gradually work its path through it in future when we have massive adoption.

Well we have seen how Bitcoin has evolved to just a creation by Satoshi to be used as means of payment to become the top assets right now. So if you are going to look at it, no it wasn't meant to get rich but as an alternatives to 'monetary system'. But now everyone is jumping on the bandwagon to make more money from casual investors to institutions or it will be very difficult for the price to be stable.

But going back to BIS statement, volatility is part of the market now, we don't need some authority like central banks, because it will totally go on the premise of decentralization.

STT

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Quote from: nimiq.cafe on May 02, 2019, 01:00:39 PM

As liquidity and value augment volatility will decrease.

Liquidity I thought should enable volatility as it means vast amounts of available currency to sell is a possibility. What I really see as the solution is greater business done in BTC regularly, so proper trade routes or something similar which is where speculation would be setup as arbitrage in that regular flow rather then people sitting on exchanges second guessing each other. What happens with too much speculation is whispers become echos affecting the market just on perceptions rather then actual demand and supply from usage by individuals. Put simply I rate the ratio of users to speculators as more important then a false brake of a central bank type body

Irvinn

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Quote from: alyssa85 on April 30, 2019, 08:31:28 AM

https://voxeu.org/article/some-simple-bitcoin-economics

Quote

According to a Financial Times article from June 2018, the Bank for International Settlements (BIS) traces the instability of crypto-prices back to the lack of a crypto central bank. The fact that the value of Bitcoin is not controlled by a designated central bank constitutes a major difference to traditional currencies.

The US Federal Reserve Bank, for instance, injects or withdraws dollars from circulation in order to meet its policy goals such as a stable rate of inflation. The supply of Bitcoin, in contrast, evolves due to decentralised computing activities of 'miners' and can only increase over time. Therefore, a traditional tool for promoting price stability is unavailable for cryptocurrencies. The BIS addresses 'unstable value' as one major challenge for cryptocurrencies for becoming major currencies in the long run.

I personally think the volatility is because so few are trading it. The more people trading a currency, the less likely a single person can move the price either with a pump or dump. It's very hard for a single actor to move the dollar against another currency for example because they'd need huge firepower.

Unfortunately trading volumes have decreased since Dec 2017, so the volatility will remain.

The Bank for International Settlements correctly pointed out that the high volatility of Bitcoin and other decentralized cryptocurrencies are associated with the lack of regulation of cryptocurrencies. Usually its price is regulated by the central bank of the country. For cryptocurrency, this method is not suitable. Its main difference from the usual currency is precisely in the fact that its price regulation is absent on the part of any authorities.
The level of cryptocurrency volatility will not be affected by the number of participants in this market. Anyway. with the increase of its participants, the level of price volatility will not fall. Demand and supply in the cryptocurrency market, which forms its price, will never be constant, which means its high price volatility will always be.

kryptqnick

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I agree with others that while high volatility does not do much good to the market, it is better than having a central bank. Firstly, the bank does not guarantee stability. The economy can collapse at any point, and gradual devaluation eventually leads the currency to become worthless. Fiat is a very bad system because it relies on people not making stupid decisions while being absolutely rational is simply not in our nature. Cryptocurrencies allow to take out the human factor. It comes with the cost of potential volatility, but I also think that it is possible to overcome it eventually and have a more or less stable currency.

nimiq.cafe

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As liquidity and value augment volatility will decrease.

dothebeats

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Volatility will never be removed on bitcoin and crypto and we certainly don't need any central banks to control the flow of coins in circulation and the value of each coin as well. That's the beauty of a decentralized, deflationary currency: it cannot fail since it has no central point, but volatility is also a boon of cryptos as due to this, merchants can't meddle with it, moreso accept it on their platforms as a form of payment. Should they accept it, they still need an intermediary to ensure profits which basically just removes yet another portion of the profits, too.

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