Who really wants to get into currencies that can double or lose half their value in a few hours or days?
Source: flickr
People want more stability when they make investments, or simply when they use a currency to buy things.
Imagine a country having a currency that doubles in a few hours/days, or worst lost half its value in a few hours/days. How economically stable do you think that country would be? Not very stable at all!
There are unstable currencies on the planet that are not appealing in economic terms, and they aren't cryptocurrencies.
In 2016, the Egyptian pound dropped by -59%, the Nigeria naira by -37%, the Turkish lira by -18%, the Argentinian peso, British pound and Mexican peso by -17% each. The biggest hit is probably the Venezuelan bolivar, with -71%, but it's not an official number so it could be higher.
Here are the top 10 weakest currencies in 2016:
Iranian Rial (IRR)
Exchange rate: USD = 30184 IRR
Sao Tomean Dobra (STD)
Exchange rate: 1 USD = 22691 STD
Vietnamese Dong (VND)
Exchange rate: 1 USD = 22396 VND
Belarusian Ruble (BYR)
Exchange rate: 1 USD = 20846 BYR
Indonesian Rupiah (IDR)
Exchange rate: 1 USD = 13873 IDR
Lao or Laotian Kip (LAK)
Exchange rate: 1 USD = 8144 LAK
Guinean Franc (GNF)
Exchange rate: USD = 7822 GNF
Paraguayan Guarani (PYG)
Exchange rate: 1 USD = 5950 PYG
Sierra Leonean Leone (SLL)
Exchange rate: 1 USD = 4129 SLL
Cambodian Riel (KHR)
Exchange rate: 1 USD = 4055 KHR
Here is a chart from zerohedge showing some of the unstable currencies, with the Turkish Lira being the most unstable national currency:
Source: zerohedge
All of these countries are not on solid ground economically. This doesn't provide a stable life for people.
And here is another image of the Lira compared to Bitcoin:
Source: zerohedge
The most popular crypotcurrency, is THAT unstable. Regardless of it's value, the value isn't stable, and this makes it less appealing for the majority of people on the planet who want stability in their lives, not playing money-games with currencies where they can lose big.
I submit that until cryptocurrencies finds a real-world way to bring stability, they will continue to be marred with pumps-and-dumps and all the other speculative BS that makes them unstable. Cryptocurrencies get the reputation of being shitcoins because of this gaming of the currencies.
What do you think? Are cryptos capable of becoming stable? If so, how?
Thank you for your time and attention! I appreciate the knowledge reaching more people. Take care. Peace.
References:
- The World's Worst Currencies
- TOP 10 of the weakest world currencies in 2016
- And The World's Most Volatile Currency Is...
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2017-03-22, 12pm
Sure, cryptocurrencies will eventually stabilize more, WHEN we tend towards a total market capitalization closer to maybe a trillion US dollars... the overall size of the game has to become large enough to where a single-- or small group of-- players can't hold enough influence to materially affect the markets.
At this time-- just my perspective-- cryptocurrencies behave less like "currencies" and far more like OTC stocks, which are also super volatile: You have some tech company who announces a new product and their stock triples in 30 days, and then the lead developer gets the flu and the stock cuts in half. For me, that's the primary problem with comparing (even unstable) fiat currencies to crypto... fiats generally have decades of track records and are "known" while cryptos are more like a small company with a hot idea.
To put a scale around this, Bitcoin wouldn't even make the Fortune 100 company list, by market capitalization (requires about $29bn), so we're dealing with "small potatoes," in the global sense. So a lot of patience is required. As a parallel point of reference, remember it was YEARS before the broader world accepted something like PayPal (non-bank financials) and that was not even exotic... 15 years later, PayPal is everywhere.
Totally agree, speculation of a "hot new company" is the mindset mostly. It will take time to bring stability. Is it just more use = more stability? I see something real-world needed, some backing, to give it something real for value correlation, not simply speculation.
Oddly enough, I think Steem/Steemit is uniquely positioned to help that kind of movement... a whole layer of "black box" stuff was removed when a broader audience could get included through something as simple as blogging/content creation. Also, the whole complex "5tw87Xty523dXpt544wW467" thing was replaced with something as easy as @krnel for transactions... may not seem like much to you or I, but for the average user that's HUGE. In the early days of the web a large reason why AOL kicked Compuserve's ass to the kerb was that I could be "Denmarkguy" rather than "5462.231.78092." So usability is going to be super important going forward.
The other thing I perceive is to not allow cryptos' love affair with decentralization to throw the "centralized structure" baby out with the bathwater. Decentralization is a nifty idea for the new economy, but excessive fragmentation is a usability nightmare, in terms of everyday application and implementation. So we must be open to the positive aspects of centralized organization.
Let's use the allegory of farming. We don't like "corporate" farming and vegetables at WalMart (centralized structures) so we're creating an alternative. So we're independent small farmers (decentralized), but in terms bringing our produce to the greater world (broader audience), it makes much more sense to have something like a Farmer's Market (pseudo-centralized framework) where everyone can bring their goods to ONE place... because nobody in the real world drives to 17 farms to shop for dinner!
So bringing this back to Steemit (taking the liberty of assuming we're the leading edge of the trend), it's great that all these new apps are being developed for the Steem blockchain, and it's great that they are independent, created in 17 basements around the globe (decentralized) but we really need to look into the reality that they (or many of them) somehow need to launch or run from inside the Steemit interface (the "Farmer's Market") or I just don't see widespread adoption of this great concept/revolution we're part of. "Average users" don't want to run 17 apps to make this show work... they'll just stay with Facebook...
Of course, that's just my unskilled opinion... I'm a usability and human factors dude, not a developer or crypto enthusiast. My point being, the product (cryptos) can't just be "revolutionary," it also has to be "attractive and easy to use" for the next generation of adopters... and Steemit/Steem holds some of the major keys to making that a reality.
Yup, eBay, kijiji, Amazon, provide a market to share products, and Facebook does it with info. The one-stop centralized market hub is something I have never been against. People want the one-click access. It makes things easier for connectivity. WeChat has taken over China in being integrated into everything. It has negative aspects of control, but if multiple apps can use a central data center, like a blockchain, then it's less of a negative hehe, while still using a central hub to market their stuff to people. Having 50 places to get get stuff is what makes Steemit hard to understand for newcomers. Data isn't centralized to access.
thanks for adding perspective to this conversation
I fully agree with you: The mass will only start using a currency when this is stable.
The currency shall at least be stable in the individuals own (little) economy (income vs expenses).
When not pegging a virtual currency to the individuals main currency (which is still a fiat currency today), a circular economy is required around the virtual currency used by an individual, ie the major part of income and expenses shall be in in the same currency whereby the prices of goods and services are not fluctuating compared to the income of the individual.
It is too ideal to think such circular economies can be created in a matter of months, or even years, therefore a different approach is required.
The approach in my view is to create virtual currencies that are pegged to the local fiat currency, like SBD is, or USDT. Such currencies are out in the market for already many decades, namely the loyalty point systems offered by many brands and companies, from credit card companies, hotels, grocery shops, department stores, to airliners and more. Such systems do not have any influence of traders, that the SBD still has. Maybe we shall indeed create those currencies, since without the 'old' financial methods to earn money by (short term) fluctuations of virtual value, short term virtual value fluctuations are not forced and triggers anymore.
The ability to create market pegged assets for any currency is a feature of Bitshares, the progenitor of Steem. You can trade BitUSD, BitGold, BitSilver, BitCNY, BitEUR, and more. The major thing that is needed next is the market liquidity to flock there.
Thank you for pointing this out. You are correct, but it is not only about creating the stable currency, and we have them indeed, all the Bitxxx, SBD, USDT etc (although I believe most of them are not 100% pegged, but kind of). It is about giving such currency a place in the individuals eco system, sellers of products and services need to adopt them, and buyers from services (employers for instance, companies buying services from freelancers and contractors and so on) need to start offering to pay in such currencies. I refer to my step 1 plan in the other comment I made. On top of that, it requires a tremendous marketing effort. Think of Paypal, that service did not grow by just being there. I don't see any of the crypto currencies being marketed as you would have to do to make a new service or good known by the mass. BUT, IMHO, none of the crypto's are ready for the mass, since point 2 in my step plan is not addressed at all. A wallet with some address like this 2gjhf2h35vjhm1q7tgqowfk is very far from user friendly. Anyhow, SBD, bitxxx is a step in the good direction (although one can argue for the success and simplicity and the growth of of Steem and Steemit, SBD maybe should be trashed, but that is another topic).
Good thing graphene chains use account names instead of hashes!
I totally agree we need a massive grassroots movement / marketing push to really make a dent.
Super indeed, something that is really required.
Interesting idea. Thanks for the feedback.
To get the mass moved away from what they know; Small steps are required. Crypto Currencies as they are now implemented, are just too big a step to take in 1 go! Even in decades when crypto currencies are not changing, I do not believe the mass will ever use them. Therefore, the only way to move from bank dominated currencies into decentralised virtual currencies is by taking the required small steps. Step 1 = get the mass used to a currency that is 1) 100% stable to their major fiat currency 2) super simple user experience 3) well integrated with current payment systems including in-store POS with the new element to the user that the currency is decentralised, not controlled by the current financial institutions (maybe don't tell the mass that it is decentralised, they don't need to know, at least it may not be the marketing slogan).
Hehe, good points. Sell it as "freedom currency" if "decentralized" is too confusing ;)
Possible indeed :) SBD = Freedom Money
Or maybe even skip the freedom part. Sell SBD as a global (non-geo-located) currency to the user/consumer. Start with alliances with global services like Uber, AirBNB and others, maybe including an in-build point system for loyalty, then it can be sold as a loyalty point system, a global currency, or a hybrid, loyalty + currency.
Great post, @krnel!
I am neither a trader nor a crypto expert, but the volatility has definitely been an argument for me to still not invest great part of my savings here.
I think besides the instability there is one more point that contributs to crypto´s unpopularity: their accessibility.
For those who aren´t part of the game and move themselves inside the exchange market yet, it´s quite complicated (slow) and unprofitable (high exchange fees) to enter. As long as fiat and old-established banking systems dominate the financial markets, the great majority will be kept outside.
But... since this is thought to be a long term project, we´ll just need a little bit of patience. Rome wasn´t built in one day either.
Steem on!
I guess this is part of the reason why some Bitcoiner sare promoting Bitcoin as "store of value" rather than a day-to-day transaction currency. The argument being that yes Bitcoin is volatile but overall it's upward volatility. I think there is a limit to how far this argument can carry.
I think a cryptocurrency that people can easily earn (like social networking for STEEM rewards) can be both volatile and go mainstream. Provided there was enough liquidity for people to cash out quickly into their local currency if they wish.
However you're right, if we expect people to abandon fiat for crypto, crypto will need to be far more stable. Although I'm sure, there are still plenty of countries where people would trust the volatility of a global currency over the whims of their government.
Hehe, absolutely, I think many citizens like Bitcoin compared to their failing governmental currencies. Good point.
So I'm wondering, wrt stability if it's a good thing that the Winklevoss ETF was denied? But couldn't any government with deep pockets manipulate the BTC price by buying/selling large quantities?
Well that would be with public money and I don't think this is allowed in the laws. What is more likely is private powers in the world that hold most of the money can do such.
in 2012 exchange rate of USD and Iranian Rial was 8000, in exactly one month it changed to 30000, the price of houses tripled at that time , inflation rate was 300% (pretty messed up time for us) and sanction against Iran was the reason of all these events, since then our currency is losing its value day by day. that is why i am interested in cryptocurrency , because at least in this market I am somehow equal as the rest of the world(not completely because buying digital currencies cost me 30% more that others because we don't have Visa,master,etc...)
I see no reference to Communications of the ACM in your zerohedge source.
LOL, nice catch, I use the html from my previous posts foro the image code I use. I forgot to change the sources when I did so. Thanks! Changed now.
Bitcoin could stabilize when it reaches a trillion dollar market cap, where it only fluctuates by a few satoshis
Is that because it's in such wide circulation at that point that speculation won't affect it as much?
That could be it. It wouldn't be seen as an investment anymore, if in wide circulation.
Sounds like you don't understand the point of cryptocurrencies - which is to REPLACE fiat. The more people move into cryptocurrencies, the less relevant their price in dollars is anyway. Toward the end they will seem extremely volatile in terms of dollars because the dollar will downward spiral against it.
Seems like you're the one who didn't bother to read what the point of this was about. I didn't say anything about it not replacing fiat, so that's a fallacious remark on your part. This post is about the instability of crypto.
I understood entirely. You have to understand that you are measuring volatility in terms of dollars. Measured that way, Bitcoin will become more volatile the more successful it becomes as the dollar loses value against it. In terms of bitcoin, Bitcoin is extremely stable staying exactly at a price of 1.
We'll see more regular folk dive into the crypto world once the prices start stabilizing. Till then, ride the waves and get rich.. :D
Do Steem dollars not solve this problem?
Steem Dollars disappear when STEEM get's too low (no more SBD "printed"). SBD is pegged, i.e. given it's value through STEEM. STEEM is the base.
It's a chicken & egg scenario, the missing element for SBD to provide stability is liquidity. Liquidity requires a sufficient trade volume. The invention of "BitAssests" back in the day by Dan Larimer / BitShares was a straightforward application of a derivatives market, BitUSD and SBD are prime examples as are NuBits.
The derivative mechanism is clear, what is needed for it to work is marketing, time and adoption. Perhaps we need to learn patience and how to focus on ease of use and identifying target audiences for specific use cases. When we can do that it's a matter of marketing to reach that audience with a clear message of how our software is the perfect tool to help those users accomplish their goals.
I think once more and more people start understanding how crypto currencies work they will become more stable. its just a bit confusing, im still learning, got a mycelium wallet with a bit of BTC in it, but trying to figure out how to trade on poloniex and quadriga coin, you gotta be fast!
I am no trader, but isn't the overall trend of BTC up, regardless of short term movements, plus it's limited amount of 21M and increasing utility would suggest it's going to stay moving in that direction at this stage of the game - or am I being fool hardy?
Having some confidence and belief in the overall implications of crypto, I'm starting to invest a modest amount on a monthly basis (dollar cost averaging) with every expectation, or at least blind faith, that it will continue to rise over time...
I'm not saying crypto won't triumph... I'm talking about how unstable it is which makes it unappealing to the public. Too much risk.
Understood. I also experience the biggest block as ease of entry / access for new / early adopters in spite of risk.
you make some very good points!
Great piece. Thanks for sharing. Shared on twitter for my followers to read. Stephen
Disclaimer: I am just a bot trying to be helpful.
generally disagree that stability might trigger mainstream adoption. In this particular case of cryptocurrency I believe mania will trigger mainstream adoption, exactly like tulip mania bubble, and with that excitment to get into crypto, it will spread
Interesting to see the South African Rand there ... Actually not that unexpected. The rand is a terrible currency these days :)