With Bitcoin being known for its volatility throughout the years, it has become hard to imagine the world where the Bitcoin price becomes very stable all of a sudden. Even though the digital currency has been fairly stable throughout 2015, things have started slipping again in early 2016. But what would happen if Bitcoin can be deemed stable? Will there a massive change from fiat to digital currency all of a sudden?
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The Utopia of A Stable Bitcoin Price
Reaching a stable Bitcoin price on its own is a very long shot, as this digital currency is valued based on price and demand. The scarcity of coins generated should eventually help stabilize the price, but it will take many more years before such a feat of strength can be achieved. It is important to keep in mind Bitcoin has only been around for seven years, whereas the monetary system exists for several hundred years, and is still very volatile right now.
Mainstream media and so-called financial experts love to point out how Bitcoin is not backed by tangible assets. At the same time, they become very quiet when their precious stocks and currencies come crashing down, even though most people assume those are backed by some asset. Truth be told, money as we know it is nothing more than an IOU which is worthless.
But there are several advantages to Bitcoin compared to paper money and physical coins. Not only can Bitcoin not be tampered with, but it also heavily reduces the chances of fraud and is not controlled by banks. Some people might see this as a negative aspect, but they should ask themselves what good banks have done for them in the past ten years. The answer might surprise them.
Getting back on topic, let’s assume the Bitcoin price remains stable at US$350 for an extended period. Would this make the digital currency more or less appealing to businesses and consumers? Probably neither, as they wouldn’t care much for a digital cash alternative as long as the traditional financial system is still around.
In the end, the only way people will see the digital currency as “stable” is when it reaches a certain Bitcoin price point denominated in fiat currency. The bigger question is not whether or not Bitcoin is volatile in price, but rather if the volatility of fiat currencies is reflecting on the value of a Bitcoin. Trading Bitcoin against fiat currency goes both ways, and the volatility of traditional finance also has a [negative] price effect on the digital currency.
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