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@ croxroadnews
2024-05-28 02:10:31Table Of Content
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Content
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Conclusion
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FAQ
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Does Bitcoin have a high degree of volatility? What factors go into determining volatility? What gives individuals with diamond hands the conviction to say "no," while those with a fiat mentality say "yes" with such conviction? Which one is right? Is it only a matter of finding common ground to disagree, or are these apparently contradictory claims actually capable of being true at the same time?
The Special Theory of Relativity
Einstein proposed a thought experiment to help explain the discrepancy in elapsed time between two clocks. Imagine two observers: one riding the train as a passenger and the other watching from the station platform. A passenger on the train witnesses two separate lightning strikes, one at the front of the carriage and the other in the back. A witness on the adjoining platform saw both the front and back of the train get hit by a bolt at the same moment. While one passenger on the train insists that the frontal strike preceded the rearward one, an observer reports that both strikes occurred at the same time.
Whose viewpoint is more reliable? Do they need to choose? Since each perspective has its own context, in Einstein's view, they are both correct.
This observation inspired Einstein to develop his special theory of relativity, which states that observers in various reference frames must form distinct subjective impressions of the simultaneity of events. Having a new frame of reference alters how one looks at things. Although this is a simplification and a limited perspective on a much bigger issue, it will do for the purpose of illustrating the divergent views on bitcoin's volatility.
Bitcoin is not volatile.
People complain that the price of bitcoin fluctuates too much, but as Einstein predicted, your perspective determines your reality.
Let's imagine Bitcoin users are commuters on a train. Because of how this technology works, our speed is always the same. One bitcoin is equivalent to one bitcoin under this protocol. A supply cap of 21 million can attest to its rarity. We get how a trustless and permissionless peer-to-peer system is guaranteed by the absence of trusted third parties or a central authority. As far as we can tell, a whale has no more influence over the ledger's control than a shrimp. Because of this familiarity, we are able to say, "Tick tock, next block," with confidence, knowing that blocks will continue to be generated around every ten minutes for the next two weeks.
Nothing here suggests instability; just the contrary. Everything here points to continuity and to the reliability of the network as a whole. A stable and safe system of value transfer over place and time is referenced, which testifies to our rooted worldview. Those of us riding the Bitcoin train may now more confidently base our financial decisions on a firm grasp of the system's underlying principles. Bitcoin users are able to have a low time preference in part because we are not as vulnerable to the distortions generated by less volatile systems, which leads to erratic economic behaviour. In other words, the protocol's predictability sustains a low time preference.
Bitcoin is volatile.
People complain that the price of bitcoin fluctuates too much, but as Einstein predicted, your perspective determines your reality.
For those on the outside looking in, it's obvious that bitcoin is highly unstable. The asset itself (the BTC/USD exchange rate, more particularly) serves as their primary reference point, rather than the network as a whole. One's perspective is skewed when the dollar's supply is subject to dramatic swings and the cost of capital is routinely manipulated, and when other currencies with similar flaws try to escape hyperinflation at the same time.
Here we see the practical application of Wittgenstein's Ruler, which asserts, "Unless you have faith in the ruler's dependability, if you use a ruler to measure a table, you may also be using the table to measure the ruler."
People whose currency of choice is the fiat variety have a muddled understanding of bitcoin as an asset because of the context in which they are viewing it.
Worse, this perceived instability discourages bystanders from investigating Bitcoin's underlying network further. They want to stick with what they know. They don't want to put in the effort to figure out why their made-up system isn't working. "Perhaps the greatest hurdle for people understanding Bitcoin is bringing their baggage from how the monetary system operates today and in the past versus how it will work in the future," says Jeff Booth.
With so much false information floating around, participants on the fiat system's merry-go-round are kept from seeing the big picture. They know that the fate of their money (in its various guises as a store of value, medium of exchange, and unit of account) could change once every four years, coinciding with presidential elections. They've been taught to assume that a select few elites "know best" how to steer an economy's expansion (while ignoring those elites' intrinsic motivations). They don't seem to care that the currency they have to use has lost 99 percent of its value since it was introduced.
That latter bit encourages those participating in the fiat system to put a premium on time, as they know their efforts will lose purchasing power over the long run. When faced with a choice between a volatile alternative asset that requires a low time preference and a great deal of effort to understand and a new, gizmo gadget that provides endless dopamine dumps, the person's perspective shifts and they are less likely to make wise economic decisions.I can see how it would be a no-brainer for them to do that.
The Theory of Monetary Relativity
People complain that the price of bitcoin fluctuates too much, but as Einstein predicted, your perspective determines your reality.
All of this may be summed up as follows: Bitcoiners derive volatility from the reference of the Bitcoin network and protocol, while proponents of fiat currencies derive volatility from the Bitcoin asset itself.
Bitcoin, according to Gigi, is not a volatile asset. Those of us who are humans As a result, we need to shift the focus away from the asset and back onto the underlying infrastructure, namely the network and the protocols that govern it. Human nature, not Bitcoin's network or protocol, is to blame for the asset's continued volatility (to the positive over the long term).
Conclusion
Supply and demand, investor and user emotion, governmental laws, and media excitement all play a role in the ups and downs of Bitcoin's price. The combination of these causes price fluctuations. The future value of Bitcoin is a common topic of discussion among cryptocurrency investors and enthusiasts, and it is rare to watch cryptocurrency news without hearing a prediction about the future value of Bitcoin. The future value of crypto is a mystery, and it is difficult to predict whether it will rise or fall. There are cryptocurrency exchanges like Coinbase that are authorised by the government where you can purchase Bitcoin. Bitcoin's price is extremely volatile, so it's not a good option for those who want to invest in it in the hopes of securing or increasing their wealth, since they run just as much risk of losing their entire investment as they do of seeing any rewards.
FAQs
How come Bitcoin fluctuates so much? There are cryptocurrency exchanges like Coinbase that are authorised by the government where you can purchase Bitcoin. Bitcoin's price is extremely volatile, so it can't be relied on to either protect or develop your wealth. You stand as good a chance of losing your entire investment as you do of seeing any gains.
Is Bitcoin more volatile than stock markets? Bitcoin and stocks both stand to benefit from a 2% daily drop in the U.S. dollar index, but BTC's volatility is significantly lower than that of the other major cryptocurrencies.
How come the price of Bitcoin is always changing? Lack of confidence in bitcoin's legitimacy as either a currency or a store of value causes its price to fluctuate. Because, after all, it's unpredictable. How Bitcoin is being used, as well as unethical trading techniques on cryptocurrency exchanges, can contribute to its volatile price.
A loss of value for Bitcoin is possible. Bitcoin's complete lack of value is confirmed by the stock market in its own unique way. Experts in the field of fictional capital place a premium on this characteristic's total lack of limits. So they use the digital currency's "promise of payment" as a basis for valueless speculation.
That's all for today
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