Bitcoin Shows Us That Not All Volatilities Are Created Equal
Enrique Dans, 09 April 2021
For many people, the main obstacle to using cryptocurrencies is that they are volatile; their value fluctuates sharply across time depending on, apparently, many different factors. To put the issue in context, the original paper on bitcoin was published in late 2008 and the first transaction in early 2009: since then, its value in dollars or euros has risen by more than 15,000%.
In contrast, over the same period of time, the parity between the dollar and the euro, has varied by a few percentage points up or down. No surprise therefore that bitcoin is seen as highly volatile and unsuitable for transactions, and at best, a store of value, subject to the systemic risk that arises every time the authorities or a government make decisions that could affect it. China talks of banning bitcoin mining and its price falls. Elon Musk uses part of Tesla’s reserves to buy bitcoin? Bitcoin rises.
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