19 Dec 2013 / American Banker – Even as newfound confidence pushes Bitcoin to record highs and as banks and policymakers issue guidance globally on the cryptocurrency, we keep returning to the same questions about its future.
Sure, Bitcoin’s rise from $13.45 a year ago to $683.84 as of Wednesday seems great, but doesn’t the currency’s volatility make it ineffective as a medium of exchange?
If prices regularly fluctuate between $800 and $1,200, how will it ever become more than a speculative asset? Won’t people want to hold onto their Bitcoin to bet on future gains instead of using it for day-to-day transactions?
It’s a nuanced question with many answers depending on your timeframe.
In the short term, there are reasons why volatility may actually be beneficial. It drives customer adoption of Bitcoin, as media outlets report on every short-term price bubble – in the process, educating the public at large on the currency’s benefits.
While we’re in this early, more volatile educational period, there are several services (including one provided by my company, Coinbase) that shield merchants from volatility risk by doing instant exchanges. When orders come in, our platform instantly converts Bitcoin to U.S. dollars so our merchant customers don’t bear foreign exchange risk…… Read more
