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Will Bitcoin Ever Find Stability? Interactivecrypto

Bitcoin Ever Find Stability

June 29, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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The impact of Bitcoin in the current economy is tremendous. With the coin gaining new users every other day, it seems like the main deal—still, the issue of volatility clouds all the success. The changes are so extreme with nobody ever sure the exact value of the asset they own. 

To understand the volatility of Bitcoin, you only need to understand the law of demand and supply. The more the amount of Bitcoin is available in the market, the lesser value.

The market speculators, therefore, are essential in the system. Any prediction of a rise in value sees many people acquire the coin leading to an even higher increase.

A decline, on the other hand, also sees most of the owners willing to sell their coins. The high volatility has seen the rate of dumping in the recent past. Some unscrupulous investors tend to buy Bitcoin when prices are rising only to sell before a resistance stage.

Most brokers are looking to control dumping by enforcing selling limits. 

Possible Ways to Stabilize Bitcoin

No matter how much Bitcoin increases in value, volatility will remain a concern. Several quarters have been looking for possible ways to stabilize the coin. One of the most popular opinions is to find a solution from within the currency that the market should find a way to control the demand and supply. 

a)    Halving 

So far, Bitcoin has only managed to affect the value of Bitcoin through halving. Halving is where the company reduces the reward given for miners per coin by half. The lower rates lead to lesser miners, thus reduced coins coming into circulation. 

There have already been three halvings since the inception of Bitcoin. The first occurred in 2012 with positive results. The currency increased in value by more than 200% as a direct result of the exercise.

This is different from 2016 one, which saw a rise of around 60%. The 2020 edition is coming at the backdrop of a rising currency, which makes it hard to quantify its effect as a whole. 

The mixed halving results mean that in as much as the Bitcoin might be looking for it as a possible stabilizing effect, it might not be so useful. Bringing us to the next option. 

b)    Matching with fiat currency 

crypto volatility

Now that an inhouse mechanism for stabilizing Bitcoin seems non-viable, other factions feel that the only way to stability is by matching Bitcoin's value with a fiat currency.

The school of thought presents the US dollar as the most viable fiat currency. However, several concerns come with the move. 

The first concern that the current Bitcoin values are so high that it would be ridiculous, reducing it to match a dollar. The other issue is regulation. The main reason for the stability of the fiat currency is government involvement.

The government controls inflation that determines the value of the money. 

By matching it to the dollar, Bitcoin must be open to similar regulations. The move is likely to face pushback from the users. Anonymity remains one of the main reasons for the growth of Bitcoin.

Otherwise, any form of control or regulation will mean the users seek for alternatives. Already several altcoins are offering higher anonymity. 

Matching the coin with the dollar also does not guarantee the success of Bitcoin. Already there are stablecoins whose value matches the dollar.

Even though the traditional financial institution highly accepts them, they haven't performed exceptionally as the other earlier cryptos. 

These limitations have yet again seen the rise of a third option. 

c)    Kill Bitcoin 

With an impasse on the best way to stabilize Bitcoin, the other option seems to do away with coin altogether, albeit temporarily. With both internal and external stabilization methods having limitations, the only way remains to restart the whole process. 

Some people feel that maybe Bitcoin was never ready for the kind of growth it has had through the years. While it’s main aim was to act as an alternative currency, it has so far surpassed every possible limit.

Doing away with the coin for some time will help the group come up with new growth plans. 

Instead of launching a decentralized coin that is ever fluctuating, they can come up with a stable currency with defined values. However, like the other options, this method has several limitations.

Killing the coin doesn’t come with assured uptake when it returns to the market. Also, no investor is willing to lose billions for the sake of stability.

The Future of Bitcoin 

Even though Bitcoin is highly volatile, it remains the crypto of the moment and the future. The world is increasingly opening up to the crypto use, which seems to push the Bitcoin uptake even further.

Already, there is an influx of crypto payment processors gateway in recent times due to the increasing adoption of Bitcoin by businesses. 

Some countries with failed national currencies are also looking towards adopting Bitcoin as a means of exchange. Countries like Venezuela and Zimbabwe are looking into the possibility of replacing their money with Bitcoin.

The more the businesses and countries take up Bitcoin, the more stability seems a big deal. It means the future of Bitcoin is more regulation, which might ultimately lead to security. 

Wrapping Up 

Bitcoin's volatility is a significant issue for most users. It is one of the reasons why some businesses and investors cannot readily embrace the coin. Keeping up with the value of the currency from time to time is such a daunting task. 

Even though several methods have been fronted to help stabilize the coin, they all come with limitations.  The currency remains a free market commodity that rises and falls depending on demand and supply. 

Still, the widespread adoption of the coin seems to be the only shot at stability. The more significant traders and national government entities accept Bitcoin, the higher the chances of more control measures. 

Bitcoin will ultimately become stable, though in some years to come. 

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