Bitcoin Q&A: Price Volatility, Pegging, Stability Video

Exchange rates in Bitcoin. Bitcoin is traded on international markets against 30-45 national currencies, in real-time. It's affected by fluctuations between those currencies indirectly. The exchange rates are defined by market dynamics (supply and demand). It is still a very small currency; it was a global currency from the day one but it is still small in size, therefore it has more volatility than many of the currencies you're used to. Over the last seven years we've seen that the volatility has gradually reduced; as it gets bigger, it becomes more stable.

Why are cryptocurrency prices so volatile? Would pegging make them less volatile? Cryptocurrency markets are like boats: the bigger the boat, the bigger the wave you need to move it. It's volatile because it's still small, but it's getting less volatile and more stable as time goes on because the market is getting bigger with more transactions. Volatility has two sides. We look econometrically at negative volatility as being damaging, not so much with upward volatility. There are national currencies with higher volatility than even bitcoin. The problem with tying / pegging a currency to an external asset is that it may work in the short term but not in the long term, as differences between the two markets emerge and at some point they can't stretch enough to accommodate fluctuations in the other. Eventually someone does an audit of the gold vault and discover it's not there, it's not real, or it's been loaned out to three different people and they all think they own it. The advantage of bitcoin is that it's on the public blockchain, everyone knows where each bitcoin is, and only the person controlling the private keys can make claim to it.

Chapters
0:00 Bitcoin exchange rates
1:43 I have a question regarding one of the most common criticisms of cryptocurrencies. Many governments around the world say, 'No, you shouldn't touch cryptocurrencies because they're so volatile.' Some other parties have created some sort of solution around it. They've created their own versions of cryptocurrencies that are tied to the U.S. dollar, the price of gold or silver. I just want to know your thoughts these. Are these good or bad solutions?
3:42 The bigger it gets, the less volatile it gets
5:31 The problem with tying it to an external asset

The first question is from a talk which took place on October 11th 2016 during the Merkle Conference in Paris, France: http://www.merkleconference.com/

Watch the full talk here: https://youtu.be/SVdIbtWPYw4

The second question is from a talk which took place on July 7th 2017 at a Bloktex event hosted by the Wisma BeeOn Group in Kuala Lumpur, Malaysia: https://antonopoulos.com/event/the-future-of-money-kuala-lumpur-malaysia/

Watch the full talk here: https://youtu.be/HaJ1hvon0E0

CLARIFICATION: At 1:17 I say that Bitcoin's market cap is ~$10 billion. At the time this video was made (October 2016), that was true. However Bitcoin's current market cap is fluctuating around $70 billion.

RELATED:
Price premiums and arbitrage - https://youtu.be/B4tsk-ZiHuE
Divisibility and deflationary monetary policy - https://youtu.be/xhLgxX_wU6E
Who determines the value of bitcoins? - https://youtu.be/DucvYCX1CVI
Altcoins and the scaling debate - https://youtu.be/slbpdW-H3yk
Global financial crisis - https://youtu.be/JU3gNC_ZPKM
Could governments take over exchanges? - https://youtu.be/9PrJQeKl9w4
Why we should resist financial surveillance - https://youtu.be/KBFedmrDTQw
Someone said "Bitcoin is dead," what do you say? - https://youtu.be/_osg3W7VI-Q

Andreas M. Antonopoulos is a technologist and serial entrepreneur who has become one of the most well-known and well-respected figures in bitcoin.

Follow on Twitter: @aantonop https://twitter.com/aantonop
Website: https://antonopoulos.com/

He is the author of two books: “Mastering Bitcoin,” published by O’Reilly Media and considered the best technical guide to bitcoin; “The Internet of Money,” a book about why bitcoin matters.

THE INTERNET OF MONEY, v1: https://www.amazon.co.uk/Internet-Money-collection-Andreas-Antonopoulos/dp/1537000454/ref=asap_bc?ie=UTF8

MASTERING BITCOIN: https://www.amazon.co.uk/Mastering-Bitcoin-Unlocking-Digital-Cryptocurrencies/dp/1449374042

[NEW] MASTERING BITCOIN, 2nd Edition: https://www.amazon.com/Mastering-Bitcoin-Programming-Open-Blockchain/dp/1491954388

Subscribe to the channel to learn more about Bitcoin & open blockchains!

If you want early-access to talks and a chance to participate in a monthly LIVE Q&A with Andreas, become a patron: https://www.patreon.com/aantonop

Music: "Unbounded" by Orfan (https://www.facebook.com/Orfan/)
Outro Graphics: Phneep (http://www.phneep.com/)
Outro Art: Rock Barcellos (http://www.rockincomics.com.br/)
Join the aantonop Channel: https://aantonop.io/joinaantonopyt

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