> I think the best we could hope for is a little worse than gold (as it continues to be mined), which AFAIK still carries a significant amount of instability.
Actually, the best we could hope for has much, much higher volatility than gold: there are vast reserves of gold available and the oceans contain about 9 pounds of gold for each person on earth, 100x the total amount of gold mined throughout human history. There are many old mines that could be reopened in a few months or years if the price would justify it.
On the demand side, there are technical uses of gold, medical and jewelry. So we clearly have demand and supply curves that are pretty flat and a price driven by fundamentals, yet we see significant volatility, especially related to gold's speculative and monetary use.
On the other hand, Bitcoin is a digital asset designed purely for speculative and monetary use. It has NO fundamental demand and an almost vertical supply curve. There's no way to price a Bitcoin on it's fundamentals, the only driving factor is "what other people think". As a future PhD in economics, let me tell you that is not conducive to stabilization, quite the opposite, it's prone to violent and self-sustaining boom and boost cycles.
The fundamental value of bitcoin is the float of all the transactions people want to engage in using the currency. Imagine that nobody speculated on the value of bitcoin, and people only entered into positions for the purpose of buying something from Silk Road. The sum of all of those positions would be the fundamental net market value of bitcoin.
If it continues to become more useful as a payment network, the value will grow and the volatility will go down.
Actually, the best we could hope for has much, much higher volatility than gold: there are vast reserves of gold available and the oceans contain about 9 pounds of gold for each person on earth, 100x the total amount of gold mined throughout human history. There are many old mines that could be reopened in a few months or years if the price would justify it.
On the demand side, there are technical uses of gold, medical and jewelry. So we clearly have demand and supply curves that are pretty flat and a price driven by fundamentals, yet we see significant volatility, especially related to gold's speculative and monetary use.
On the other hand, Bitcoin is a digital asset designed purely for speculative and monetary use. It has NO fundamental demand and an almost vertical supply curve. There's no way to price a Bitcoin on it's fundamentals, the only driving factor is "what other people think". As a future PhD in economics, let me tell you that is not conducive to stabilization, quite the opposite, it's prone to violent and self-sustaining boom and boost cycles.