Note: my draft version of this post has hyperlinks and meme pics. If you want to see that version, I also posted it to https://0billionuplink.substack.com/p/the-bitcoin-is-too-volatile-fud?utm_source=twitter&sd=pf ###############

First, let’s address the scope of this discussion. The FUD surrounding Bitcoin volatility can have different contexts. Most recently, it was propagandized that people cannot live on Bitcoin. There are in fact, people that live on Bitcoin.

Volatility is a phenomenon of nascency. Bitcoin is still a new asset as compared to the traditional markets, and speculation drives its price. When Bitcoin purchases are motivated less by speculators and traders and instead dominated by salaries, escrows, and payments, the Bitcoin market will mature and volatility will drop. We are still early.

Bitcoin’s volatility is a red herring. It’s misleading, it’s subjective, it’s flawed and it’s a doo-doo argument against its primary purpose. Self-sovereignty.

If you’re busy, you can leave now.

Starving to Death ##############

Let’s dive into the shenanigans that inspired this piece. In Telegram, a person (we’ll call this person ‘G’) bombarded the group with appeals to emotion to criticize Bitcoin. G claimed Bitcoin is causing some Orwellian mass deaths in Africa. “Bitcoin is too volatile, people are starving to death in Africa. Bitcoin will kill people.”

I think someone needs to tell this person who has lived on Bitcoin (and documented how) before he starves to death.

There is a key point these privileged edgelords ignore. If you were to live on the Bitcoin Standard, would you fail to see beyond your nose or would you plan for every contingency you can imagine? A Bitcoiner living on Bitcoin is not living on whimsy and wonder. You would probably store a year’s worth of food and emergency supplies. You would keep a bit of your net worth in some sort of cash reserves and other items of value. Yes, that is not entirely on the Bitcoin Standard, but we established this is a nascent asset, didn’t we? For those times when economic downturns strike, you spend less Bitcoin. This should be no different than how you live now. Prepare for hard times and live conservatively when needed. You adjust your financial planning as the Bitcoin market matures.

People peddling this type of appeal to emotion are utterly irredeemable.

Volatility is Par for the Course #################

Bitcoin has a small market capitalization compared to stocks and an inelastic supply. To exacerbate this impact, Bitcoin does not increase its supply in response to demand as Wall Street does. This nascency makes it more volatile than assets in the legacy financial system. The market has become better at absorbing the selling pressure from world events but it is still an emerging money. We want a currency that cannot be debased and that is not adopted without volatility.

“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” -Satoshi Nakamoto

So now you say, ‘Ok, you have a currency that cannot be debased. But what about volatility?’

Because calling Bitcoin ‘too volatile’ is both subjective and not always true (see texas sharpshooter fallacy) I’m going to use a bit of whataboutism. This is not an appeal to hypocrisy, but to bring a perspective that it is expected and a natural progression for an emerging money. Volatility is an unavoidable cycle seen in traditional markets. How about a more specific blue chip stock? Take a look at how Bitcoin had lower volatility than Tesla.

Since we’ve asked what about volatility, let’s indulge in some more tu quoque: *Tech Stocks are volatile, especially new ones *Airline stocks are volatile *Oil is volatile *Commodities are volatile (oh wait, Bitcoin is a commodity) *Altcoins are perilously volatile

What Bitcoin’s volatility gets you: *24/7 global trading. Bitcoin never closes *Free unregulated market *Trade it anywhere - You’re not limited to the NYSE *No limits *No bailouts *No circuit breakers *No debasement *No Trust

Keep in mind, It is still difficult for the average investor to gain exposure to Bitcoin. Most people are hesitant to sign up for an exchange account. Sure, apps like CashApp have greater reach but we’re still a long way from ubiquitous exposure to Bitcoin.

The good news is accumulation, rather than trading, mitigates some of the risks of the volatility. Stack Sats and Stay Humble, so the saying goes. If that is not comforting enough, consider that the volatility could work in your favor.

Volatility is Dropping ###############

All of this assumes that the anxiety over Bitcoin’s volatility defines its property as a store of value. There is a reason you don’t cash out all your assets into dollars and hold them until retirement. You would have the same amount of money (marginally more with abysmal savings interest rates) but far less purchasing power. Inflation eats away at the value of that ‘stable’ currency.

Bitcoin volatility has dropped over time. In December of 2022, Bitcoin hit a 2-year low for volatility. Bitcoin’s volatility decreases as it matures. As its liquidity grows, sales of Bitcoin become more easily absorbed by the market.

Cyclically, Bitcoin’s price has appreciated during each 4-year halving cycle (~1.5 years into the cycle). No one who has held Bitcoin from one halving cycle to the next has lost money. If you zoom out, the volatility is trivial. We’ll be waiting until 2024 to see if this trend continues.

The Bitcoin Protocol itself is Not Volatile ############## Bitcoin does exactly what it was designed to do. It does not change monetary policy. You cannot change the rules by owning more Bitcoin than everyone else. It produces a new block every ~10 min.

Tick Tock Next Block.

The Fallacy of Exclusion ###############

You may have heard critics quiver with excitement when conflating inflation with short-term price action. It’s a painfully derivative premise. Bitcoin’s price dropped >70% over the past 12 months. I concede that ‘Oof’. The decreased purchasing power in terms of fiat dollars is one context for inflation. However, we have to be fair and apply this definition during the price rises of Bitcoin. That means for every halving cycle, Bitcoin has been deflationary. If we choose to focus on this context of inflation, the argument becomes tenuous when flipped on its head. But hey, you sound smart saying it.

But Altcoins have more Volatility to the Upside ###############

What about the lack of magnitude of this volatility compared to altcoins? X coin goes up Y% more than Bitcoin. Yes, but it tends to take years to reach a USD ATH and hits a BTC ATH only once. From 2013 - 2017, only 2 of the top 20 Altcoins ever reached BTC ATH again, and never have since. During 2017 - 2021, every top altcoin never again reached BTC ATH (after initial). 2022 just wrapped up, so I’ll need to come back and update this section.

Logical Fallacies Quick Reference ###############

When you inevitably become a Bitcoiner, you’ll need to address Myths and FUD against Bitcoin and you’ll want to be able to quickly identify what logical fallacies are being addressed. Here are the logical fallacies related to this topic:

*texas sharpshooter fallacy *appeal to emotion *red herring *whataboutism / tu quoque *Fallacy of Exclusion / Cherry Picking

Closing Thoughts ##############

Bottom line, Bitcoin does have more than a fair amount of volatility short term, but long term this works to the benefit of long-term holders. Expecting a nascent currency to grow without volatility is a delusion.

This post is part of a series I will be calling the Bitcoin FUD and Myth Cheat Sheet.

Note: a few of these points were borrowed from Trader University