The volatility has quite a few causes, among them:
- Other currencies are used for all sorts of things that don't involve trading them–i.e. when have you last thought about exchanging those USD in your pocket for Euro? That creates stability. Compare to bitcoin, where almost everyone owning any keeps an eye on the market and is principally willing to buy or sell when they think they see an opportunity.
- Markets for real currencies operate under government supervision and regulation, and the facts that influence their value, such as employment numbers or GDP growth, are public, and reliable. For bitcoin, some rumour from China can move the market because nobody knows which information to trust.
In another thread I was commenting about the volatility of the currency and how it could be a vanity metric how we give value to it based on its USD conversion rate.
I think this issue will be solved when there are more places accepting BTC. Then you wouldn't need to keep an eye for when to buy/sell it. You would be able to spend it.
I read on /r/btc/ someone saying that "currently, BitCoin are like Magic The Gathering cards". And it really does!
For a worldwide market Bitcoin is tiny. It doesn't take that much real money to significantly shift its value. Regular currencies are padded by the fact that trillions of it are spread across the globe in billions of accounts. With Bitcoin you can have one guy making a measly $50m buy and the market will go crazy. Same with a sell. And then there's all of the pileon effects when the market starts to move fast and people panic.
The smaller a market is the less buffer it has against volatility.
A stock share is partial ownership of a for-profit venture for gain. Bitcoin is more akin to a precious metal or commodity, except that btc doesn't have any utility value like gold, silver or copper do.
Stocks pay dividends and entitle the owner to certain rights. Btc gives you some crypto that others trust.
Gold, platinum, silver and copper all have use in electronics manufacturing and jewelry. Platinum is used in catalytic converters for exhaust treatment. They are very useful.
Btc is actually a detriment to the environment without any real utility. The evidence of work algorithms burn fossil fuels and add CO2 and other pollution into the atmosphere, and at the end of the day, all you have is a bunch of useless 1s and 0s that we attribute with value that are incapable of doing anything other than represent a finite portion of a really complex math problem that we attribute value to.
The thing I love about bitcoin is that a $500 swing in a single day (or hour) is completely normal and par for the course. Sort of amusing in how ridiculous it is.
i don't think its crashed at all in the last 8 months. we've seen some shakeups, sure. But I can think of two crashes in the entire history of bitcoin.
June 2011. from 30 down to under $1, and Feb 2014 when MtGox finally imploded.
These last few have been sell offs and market manipulation which only lasted a few days.