Saturday, November 23, 2013

A Short Note on the Volatility of Bitcoin

The volatility of bitcoin should not be in the least surprising, since - given its very small capitalization and marketability relative to its intended role as a currency - its size and liquidity is curently roughly equivalent to that of a penny stock as compared with major exchange-listed companies, and its growth prospects and the attendant uncertainty roughly equivalent to that of an early-stage biotech company. In other words, it meets all the characteristics of a highly speculative financial instrument, especially given its additional advantage of being a hedge against rapidly inflating fiat monies. It will gradually lose these characteristics as its capitalization, marketability, and liquidity grow, and its price will subsequently stabilize.

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