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Here’s why volatility isn’t a big problem for Bitcoin

Here’s why volatility isn’t a big problem for Bitcoin

(Austin Kirk)

(Austin Kirk)

Bitcoin investors have had a wild ride over the last week. On Wednesday, the cryptocurrency was trading near $1,200. Then, over the next couple of days, the currency plunged, falling below $600 early Saturday morning. Then the currency rallied, rising to around $900 as this article was posted.

Bitcoin skeptics say this illustrates a fatal flaw in the decentralized payment network. “Bitcoins will undoubtedly rise in quoted value again, and also fall again,” writes Michael Hiltzik of the Los Angeles Times. “The one inevitability about them is their volatility, to which there’s no end in sight.”

It’s true that Bitcoin’s volatility is a problem right now, but it’s a mistake to treat volatility as an intrinsic characteristic of the currency. Bitcoin is volatile for two basic reasons: it’s currently difficult to purchase Bitcoins with dollars, and there’s a lot of uncertainty about the Bitcoin network’s long-term prospects. These are both issues that should get resolved in the coming years, making the cryptocurrency much less volatile.


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This entry was posted on December 9, 2013 by and tagged .

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