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BTC volatility will presumably fall as the market cap grows. One would expect Institutional traders who make money on volatility will continue to move in as it
by lumost 5y ago
BTC volatility will presumably fall as the market cap grows. One would expect Institutional traders who make money on volatility will continue to move in as it becomes easier to bank on some long-term average price of BTC relative to other currencies.
Something I suspect we often forget about in the world of stable reserve currencies is that the majority of the world can't run floating exchange rates without encountering major volatility. Standard Fiat/Gold backed currencies generally require some large institution to control the currency price either via money supply, foreign currency supply, gold, or government decreed exchange rates. When these institutions fail currencies tend to have rather extreme swings.
- PragmaticPulp 5y ago> BTC volatility will presumably fall as the market cap grows. One would expect Institutional traders who make money on volatility will continue to move in… I don’t buy it. Those institutional traders have plenty of access in 2021 and it’s still as volatile as ever. The extreme volatility is what makes them their money and also convinces the casual investor to put money into Bitcoin because they think it might 100X again. If the volatility stops, so does the crypto party. Big traders don’t want it to stop.
- qeternity 5y agoInstitutional trader here. Yes, this. Crypto is popular with traders because it's volatile and fragmented.
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- stiltzkin 5y agoOn crypto you need an asterisk as this is not a problem with stable coins as USDC or Dai.
- qeternity 5y agoCategorically, crypto is volatile. Just because some things aren't doesn't change that.
- Milolol 5y agoOvercollateralized stablecoins (like DAI) are not volatile and they are in the category of cryptocurrency. So they do change that. The change is slight, but ever-growing. BTC's price itself has grown much less volatile. > the volatility spikes in Bitcoin were most extreme in 2011, with subsequent spikes in volatility lessening over time https://bitcoinist.com/looking-at-bitcoin-volatility-over-the-years/ https://bitcoinist.com/looking-at-bitcoin-volatility-over-th...
- stiltzkin 5y agoIf stable coins are not volatile that does not mean all crypto is volatile.
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- bko 5y agoA lot of it has to do with the amount of leverage you're allowed to take on these exchanges. If you have 20:1 leverage, your collateral will automatically be liquidated (or purchased) if the price moves 5% out of your favor. This causes death spirals as more crypto gets dumped (or bought in case of short selling) magnifying the movement. Crypto needs a strong financial network of derivative products. There need to be instruments to hedge the price risk for short periods. There's no reason you shouldn't be able to cap movements for a fixed time period, limiting the amount you can lose. So if I want to use it as transfer of fiat, I should be able to do so within a reasonable timeframe.
- jayd16 5y agoAgreed. Volatility being profitable just incentives volatility. We usually combat this with regulation but that doesn't seem feasible here. And as you say, that's the appeal anyway.
- rchaud 5y ago> BTC volatility will presumably fall as the market cap grows. "Presumably" is the key word. There is nobody to verify that the billions in Tether, BUSD and USDC used to buy BTC (and influence the price) are backed by real dollars.
- csomar 5y ago> BTC volatility will presumably fall as the market cap grows. They are not related. Gold, oil and gas are also very volatile and have massive market caps. This doesn't matter, however. There will be traders who make market that will buy the volatility during the transaction for a fixed fee.