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Comment by ok_craig | Hacker News Reader

I don't think even bitcoin enthusiasts are saying bitcoin will be stable in the near future. Only that once it's widely adopted and reaches its growth potential or near it, it will then be stable.

If it is to be adopted widely, at some point it has to go from being distributed among a few million, to being distributed among a few billion. The continual price rise will correlate with that adoption continuing to happen.

So yeah, I understand all these arguments about volatility, but the reason they don't bother me is because they don't seem to point out anything bad about bitcoin in principle, in the long-term, they only point out the negative aspects of using it as a currency while its undergoing its adoption phase. I don't think there's actually any argument that using bitcoin as a currency right now isn't going to work as well as dollars/euros.

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In the short term, 90% of bitcoin's value is driven by speculation of future adoption, as you say. If it does become widely adopted, it should be far less volatile than it is today, but it will remain more volatile than well-managed fiat like the dollar, since the supply of bitcoin is inelastic and therefore cannot react to fluctuations in demand. So, it might end up looking more like gold, rather than a "demented Internet stock", but it'll never be as stable as the dollar is today.

>but it'll never be as stable as the dollar is today.

That's right, and it's a feature, not a bug.

That's really not a feature for anyone.

Then hold Dollars.

Well said. I've had enough of this inflation. The poorer you are, the less likely you have money in any investment that is yields better results that inflation. The richer you are, the more likely you have your money both diversified and invested with good ROI.

The poorer you are, the less likely you are to have wealth to protect from inflation. If wages would keep pace with inflation, there would be no problem at all. To my mind, there is a wage problem for the poor, not an inflation problem.

Those that do have wealth to protect should be encouraged to use it for productive investments. Mild inflation is one way to do that, and it is healthy. Massive inflation to fund overseas adventurism on the other hand, is not healthy.

As the author of this piece correctly points out, deflation leads to hording behavior. In a world where everyone used bitcoin, the wealth disparity would only grow faster.

Inflation helps for capital and labor. It forces capital to be involved, and it lets labor be devalued. Wages are extremely sticky, but only nominally.

Wage increases always lag inflation. In a market a with huge labor surplus, wages may lag longer than many can tolerate.

Elasticity of supply and inflation rate are two completely orthogonal concepts. A deflationary currency can still have elastic supply, and an inflationary currency can still have inelastic supply.

Elasticity simply refers to whether the supply can react to price. In bitcoin's case, it cannot, since the supply is determined by an algorithm.

All I'm saying is that right now, while it's being adopted, growth and volatility are the same thing.

Sentiments along the lines of: "For bitcoin to be adopted, it should be stable first" don't make sense, because adoption (demand) drives the instability. That statement is the equivalent of saying "For bitcoin to grow, it should not be growing."

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