Bitcoin markets have definitely been known to be volatile. Historically, the cryptocurrency has experienced major moves in both directions. Because of this, there's been a constant debate regarding whether or not this volatility is a positive trait or a significant disadvantage. As with most good arguments, a case can be made in favor of either side.
Bitcoin’s Volatility Can Be a Good Thing…
This 7-day chart in itself shows us that undeniably, Bitcoin is, indeed, volatile!
The King of cryptocurrency climbed to almost $14,000 shortly before yielding back to about $10,800. And this whole up and then down process only took but a few short days.
That being said, according to prominent Bitcoin proponent Conner Brown, the cryptocurrency’s often intense volatility does certainly provide some benefits.
Conner Brown tweets:
According to him, volatility is what shakes out weak market players and promises that Bitcoin goes “to the strongest of hodlers.” He also makes the case that it positions Bitcoin in the limelight, as the more volatile it is, the more press headlines it attracts..
From a more basic perspective, Bitcoin's volatility is a direct feature of its outright scarcity. Brown says that due to the fact that its supply is static, the price is volatile..
Simultaneously, he points out that volatility is called for in order for something to go “from nothing to a global reserve asset.” He states that it's an essential part of Bitcoin's evolutionary process and that “new money” is not born all of a sudden as a perfectly stable and liquid “store of value overnight.”.
Brown is not the only person in favor of Bitcoin's raving volatility. Arthur Hayes, CEO of the prominent Bitcoin margin trading exchange BitMEX, has also spoken of it as a benefit.
With Every Good, there Must Also be Bad…
Bitcoin's high volatility at the same time has its downfalls. It's typically linked to price and market manipulation. This is among the reasons why the US Securities and Exchange Commission (SEC) has yet to approve a Bitcoin ETF..
Last year, the Commission rejected the application of Cameron and Tyler Winklevoss on the grounds that Bitcoin is subject to a serious amount of fraud along with manipulation..
Consequently, it's probably safe to assume that the SEC sees this rampaging volatility as being one of the roadblocks for approving an ETF..
Furthermore, Bitcoin's high volatility makes trading a lot riskier. Whilst some view this as an opportunity, others are definitely challenged by the constant and major swings.
In any case, it's very clear that Bitcoin's volatility involves its fair share of pros and cons. It's vital to keep that in mind when you trade or invest in the asset in order to prevent major losses.
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