It happens regularly, and yes, people do notice, lol
Get used to it. All part of the fun of the rollercoaster. A rollercoaster that only went up would be no fun
Get used to it. All part of the fun of the rollercoaster. A rollercoaster that only went up would be no fun
So you're saying if you had a stock that lost 50% of its value in a several day period, it would all be part of the fun?
Volatility, Capital Markets, and Regulation
No but that's why there is intervention in capital markets (lending companies money, or buying their stock) ... that's sort of the whole justification of Market Regulation
it's not that the market needs regulation (it sure doesn't)
But most people would agree more capital formation is better than less (more enterprises start soon, innovation continues quicker, although some may argue that if capital forms too fast the pace of innovation may outpace the ability to redeploy labor causing structural employment issues which is arguably happening today... although to me more innovation always wins out)
Most people can't be bothered to understand the nature of captial markets so if they are perceived to be unfair or overly volatile people shy away from them.
So the reason for having a specialist on the floor of the exchange (once upon a time, now a bunch of market makers) and rules regarding insider trading, short selling etc. Is not that the market can't work without them but the perception of market fairness and the dampened volatility allows mom and pop to feel more comfortable committing their capital and letting capital accumulate. (which also leads to higher capital asset prices... although this can lead to bubbles)
(I'm not against regulation in theory, I just think government does a freaking horrible job of as it does everything else due to it's structure as a institution)
Now how does this relate to Bitcoin based currencies?
Well without a central server or issuer it results in a couple of different possible outcomes:
- No one will care enough to try to dampen the price volatility in any way, which is fine, adoption rates will be slow but eventually adoption will grow enough that volatility will be fairly mild except for the occasional panic buying and selling. (the market on it's own will eventually get there on it's own, some people don't have patience, thus market intervention)
- Exchanges will begin voluntarily regulating the trading on their exchange (size limits, establishing specialists or markets makers, etc.) and the exchange with the least volatility will be the exchange mom and pop will go to and where people looking to buy or sell large lots will go to while the less regulated one will be the haven of speculators. (Ideal free market situation)
- Individuals in the community form an outside entity, pool their bitcoin together and for a sort of stabilization fund that will attempt to dampen volatility of the major exchanges without the exchanges help
In the the two scenarios where volatility is dampened, bitcoin adoptions will be faster, in the first one it won't.
Other future non-bitcoin based currencies may have central servers with a central issuer (the one man central bank) that may attempt to manage volatility through psuedo monetary policy and whoever is able to do it the best will be chosen by the market.
