I just try to find the major reasons for the very high volatility of bitcoins price we all encountered over the last years.
1) Exponential Growth ( in trust and usage)
It's clear this is a very strong reason to cause price volatility, since we have double and double of requesters that all needs to get coins from a scarce bitcoin supply.
So we see price squeezes all over the time (more up than down). Further we have no or lost experience with such exponential growth process esp in money (last adoption was gold some 1000 years before)
2) Evaluation Base CCY ?
I have the strong suspicion that bitcoins volatility is positive correlated to the volatility of the lowest trusted fiat currencies' volatility in the world.
Sadly I cannot proof this by averaging the historical volatilities of a 'poor's currency basket' of (Zimbabwe$, Venezuela$, Egypt pound, Jemen slotty, Syria Dinar,..xyz...) but I estimate, that we have same volatility there as in bitcoin. And all people living in those countries should be way better off with bitcoin and it's vola!
We just see and measure BTC/USD - volatility is high, but we forget where it's based on - on the poor ccys all together - but they are dominant here.
3) Heterogeneous Markets
We now have some 100 different exchanges and local places where you can exchange you bitcoin against any other fiat or crypto. There is no condensed order book / matching for a trade and limited arbitrage due to capital protection of some states.
I'd guess we'd see a fraction of the actual valtility,if we would have a (ideal) single world exchange, where all must trade BTC/USD (USD is just a default example for a world fiat and rest crypto ccy) .
Any other reasons you could see?
Bitcoin supply and demand will rate the volatility of the bitcoin value. As adoption rate increases price will move forward and if there is any market fall happens then bitcoin related business or project that time will see the dump in price.
Precisely, because bitcoin would never be on where it is right now if there are no bitcoin users, investors, and so on, because of the demand and supply, bitcoin population is growing even more than we are expecting. Bitcoin is not popular to the ordinary people who only know fiat where they are getting their source of income. This volatility is the reason why bitcoin is giving us hope that someday it could make us rich because its price would be higher than the sky in the near future.
If we are going to hold our bitcoin and continuing what we are doing right now, and not spending our bitcoin on the things that could be bought by fiat or something, then I could assure you that in the near future, expect that you are going to have millions of money in your hand.
