BTC main value proposition is to be a decentralized currency and/or value store. 1. The BTC community desires it to be widely adopted by the population. But price volatility prevents so. A significant amount of people cannot afford the cost of volatility.
A big argument against inflation is that it raises the cost of business. The same argument can be used to criticize BTC. BTC volatility raises the cost of doing business if BTC is your only capital. If we desire BTC adoption to rise we must take care of BTC price fluctuation. BTC demand is highly unpredictable while supply is predictable, resulting in unpredictable prices. That means volatility can't change unless demand stabilizes.
Common counter-arguments:
3 "BTC is volatile but it always rises in the long-term so it doesn't matter". Is it does, it increases the cost of business. I can't start a bakery with only BTC capital because in the first dip I will have to take loans to pay wages.
3.1 "Oh, but you can't see that happening because you can't see far enough." This sounds like a highly utopian view. Pragmatically, we need a path from here to there, I turn to you and ask, how can we get there?
3.2 "Okay, it doesn't matter for some people and that's all". Okay, then BTC will be a niche store of value, contradicting #1.
4 "Demand will stabilize in the long term." How?
5 "Price stability is a myth, market demands always change them" Sure, it's a myth. Yet it is desirable. If we are designing the system, shouldn't we take that in account? "No, we shouldn't, if you want to do that go and create your own coin." Okay, then BTC will be a niche store of value, contradicting #1.
What incentives do savers have to buy-in on a inflationary money supply? The incentive of stability? That's one reason people agree being exposed to the USD. Am I defending inflation tax? No. I'm asking could there be benefits to having a transparent voluntary contract with varying money supply rate. And I'm leaning towards a yes to this question.
If the supply of a coin could be influenced by price then we would have a more stable coin, the cost we pay is inflation. The issue then becomes an optimization issue, on what would be a proper trade-off.
What are your thoughts?
You have good points. It's true that volatility prevents adoption, in order to have a mass adoption of a certain currency it is recommended to have a stable value. It indicates a stable economy too.
I agree with you both but isnt it what makes bitcoin special and the most valuable coin today? Volatility is needed for bitcoin to grow, it is like Gold, since not everybody can afford it, that what makes it more expensive, a good criteria for traders and users, if the price of bitcoin will be stable, then it will not reach its present value and the leading crypto in the market today.
