A major hinderance to mainstream adoption of Bitcoin is its price volatility.
The following illustrates this volatility by means of analogy through the comparison of the purchasing power of a gallon of gasoline in terms of Bitcoin and USD as presented within the book The Age of Cryptocurrency. As shown, when considering the purchase of gasoline with Bitcoin, the consumer must consider not only the cost of the gasoline itself, but the price of Bitcoin, which historically has been subject to large swings.
This historical volatility is shown below in the historical Bitcoin price as reported by Coindesk:
Although it’s interesting to note that if we are to consider the price over the past year, the graph appears much more smooth and linear. Perhaps this is signalling the maturing of Bitcoin, at least when compared to its earlier, more volatile days. The price has been trending upwards over the past year.
Some believe that the early volatility of Bitcoin was of benefit, if not required for the early adoption of the cryptocurrency. The idea underlying this concept is that the early volatility generated a sense of excitement which attracted very early adopters, cryptocurrency traders, and venture capitalists.
This makes sense. The volatile price swings in Bitcoin allowed cryptocurrency traders to gain significant early profits (and losses) which created a gold rush of sorts. The venture capitalists were, and continue to be, enticed by the potential profitability of backing the firm(s) that create the interface between the complexities inherent within the technical aspects of cryptocurrencies and the mainstream public, who may or may not be technically inclined. The potential profitability appeals to entrepreneurs, in addition to the wild west environment characteristic to this type of new exciting industry.
Beyond volatility, the same theorists believe that Bitcoin will experience a maturation process and that the price will level out over time. This will appeal to the mainstream consumer as Bitcoin will serve as a better store of value, however it will likely drive away the early adopters, entrepreneurs, and venture capitalists as some functionality will undoubtedly be stripped away technically and it begins to resemble a more traditional fiat currency.
It will be interesting to see what is in store for Bitcoin, and digital currencies in general. The upcoming halving event (only the second in the history of Bitcoin) will likely have an impact on the overall Bitcoin environment. Will this halving event serve as another volatility event for Bitcoin or will it emerge relatively unscathed? I suppose only time will tell.
One thing is certain, with the creation of Bitcoin we have reached a new societal milestone. Whether it is Bitcoin or an alternate cryptocurrency such as Ethereum, digital currency in general will continue to gain wider adoption globally.
For additional information concerning Bitcoin volatility as well as the potential opportunities and challenges associated with digital currency refer to The Age of Cryptocurrency by Paul Vigna and Michael J. Casey.