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.
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.