4 ms·

I don't know much about monetary policy. Why does adoption imply price stability?

by brucephillips 9y ago

lifty 9y ago
I don't think there are any guarantees, but the reasoning is that widespread adoption implies that the violent capital inflows have subdued and a more stable equilibrium is reached. Of course, panics can still happen for various reasons (security breaches, outlawing it etc).
- brucephillips 9y ago
  What about violent capital outflows?
mtgx 9y ago
Right now there are still trillions of dollars that could go into Bitcoin (potentially), and the more of that money gets converted into Bitcoin, the more its price increases (because the number of Bitcoins is relatively stable from month to month or even year to year, so it's logical that 1BTC will cost more when $1 trillion are put into Bitcoin than when $100 billion are put into Bitcoin). As Bitcoin gets closer to its "maximum potential" (which could very well be the total world transactions being done in Bitcoin, or say 50% of them, if Bitcoin's share of total cryptocurrency market cap remains the same as it is now), the price should stabilize, as there wouldn't be extra money that could be put into Bitcoin, or at least not much more than there already is. Also, there's a big difference between adding $100 billion into Bitcoin when the total Bitcoin market cap is $100 billion before that, and adding $100 billion when Bitcoin's market cap is $10 trillion. That's why when Bitcoin's market cap will represent a much larger share of the world transactions, its price should become increasingly more stable.
- brucephillips 9y ago
  > the price should stabilize, as there wouldn't be extra money that could be put into Bitcoin. I've heard some wild logic from BTC fans, but this takes the cake. BTC will stabilize because no more money can be put into it, huh? What about, you know, money that can be taken out?

4 ms·

I don't know much about monetary policy. Why does adoption imply price stability?

by brucephillips 9y ago

I don't know much about monetary policy. Why does adoption imply price stability?

lifty 9y ago
I don't think there are any guarantees, but the reasoning is that widespread adoption implies that the violent capital inflows have subdued and a more stable equilibrium is reached. Of course, panics can still happen for various reasons (security breaches, outlawing it etc).
- brucephillips 9y ago
  What about violent capital outflows?
mtgx 9y ago
Right now there are still trillions of dollars that could go into Bitcoin (potentially), and the more of that money gets converted into Bitcoin, the more its price increases (because the number of Bitcoins is relatively stable from month to month or even year to year, so it's logical that 1BTC will cost more when $1 trillion are put into Bitcoin than when $100 billion are put into Bitcoin). As Bitcoin gets closer to its "maximum potential" (which could very well be the total world transactions being done in Bitcoin, or say 50% of them, if Bitcoin's share of total cryptocurrency market cap remains the same as it is now), the price should stabilize, as there wouldn't be extra money that could be put into Bitcoin, or at least not much more than there already is. Also, there's a big difference between adding $100 billion into Bitcoin when the total Bitcoin market cap is $100 billion before that, and adding $100 billion when Bitcoin's market cap is $10 trillion. That's why when Bitcoin's market cap will represent a much larger share of the world transactions, its price should become increasingly more stable.
- brucephillips 9y ago
  > the price should stabilize, as there wouldn't be extra money that could be put into Bitcoin. I've heard some wild logic from BTC fans, but this takes the cake. BTC will stabilize because no more money can be put into it, huh? What about, you know, money that can be taken out?