A new monetary asset that regularly grows in both popularity and usefulness will always be volatile - that's just human nature.
The establishment will fight to suppress it and instill fear, uncertainty and doubt in all participants. Even without intervention, volatility is part of the course as Bitcoin's price goes too high during bull runs.
Gold was similarly volatile during the Weimar Republic's hyperinflation. Notice how the monthly percentage change was all over the place - many times more volatile than Bitcoin today.
gold volatility during weimar hyperinflation
In theory, we should expect Bitcoin to be even more volatile than this during extreme periods.
One can expect volatility when a freely chosen unit monetizes through market processes. Bitcoin’s volatility is further not surprising because it:
1. is still not widely understood
2. is still in early stages of development (Lightning, etc.)
3. derives value from government instability, which itself increases market uncertainty and market volatility
4. has uncertain expectations of future utility (regulatory clarity).
5. is decentralized. Centralized sectors have low volatility because it takes just a handful of actors to suppress it. Communism had no price volatility (until it collapsed).
So next time someone rehashes the same old argument against Bitcoin - "it's too volatile" - tell them that's expected. Not only that - it's good.
Unless Bitcoin becomes heavily manipulated or human nature changes, a new monetary asset that regularly grows in both popularity and usefulness will always be volatile.
To complain that nobody will use Bitcoin because it’s volatile is to say
> “Bitcoin’s adoption rate is so astonishingly fast that it will never be popular!“
If Bitcoin were less volatile, would it have an even more rapid adoption rate?
Bitcoin’s price has to go up as more people start using it, and if a lot of new people start using it, then it has to go up fast (that is, be volatile).
Unlike everything else, a higher price for Bitcoin does not reduce its utility - you just trade with smaller amounts.
In fact, a higher price makes it more useful because more people want to use it.
There is no reason to think that Bitcoin will stabilize in terms of other currencies. Once Bitcoin starts killing the other currencies, it will still be volatile, which will still indicate its success.
-- parts of this is an excerpt from the 2-minute version of Bitcoin Hypermonetization: Bubble Talk (2013), originally posted in https://www.2minutebitcoin.org/blog/bitcoin-hypermonetization-bubble-talk-2013 and another part is an excerpt from the 2-minute version of I Love Bitcoin's Volatility (2014) accessible here https://www.2minutebitcoin.org/blog/i-love-bitcoins-volatility