I have been thinking about this issue for a while. In my opinion adoption is critical to prevent the complete financialization of bitcoin.
There is no doubt that bitcoin volatility does inhibit adoption, particularly in the case of businesses in underserved, impoverished communities.
We all know that stablecoins are often the alternative of choice in areas subject to unstable, depreciating fiat. The average person can't afford to hodl when they have daily expenses. The same applies to the small businesses serving these communities.
It seems there is a need for volatility insurance for business owners who won't or can't assume the risk. It would of necessity be bitcoin based. The fees would be calculated, and the risk to the insurance company mitigated, in the same way fiat insurance operates, ie actuarial science, hedging, investing, etc. It's a win/win. These companies foster adoption and benefit from bitcoin's long term value growth.
Does anyone know if such insurers exist, or whether this has been tried in the past?
It's a chicken and egg problem. Volatility is not on the Bitcoin side, but on the dollar side....
The more merchants are selling their BTC on the market to get back dollars, more volatility will create. The less bitcoin they will sell, stronger will became. Merchants MUST start paying also in BTC, suppliers and employees and start that bitcoin circular economy.
Otherwise the so called volatility will always exist and will NEVER go. We will be forever fiat slaves.
Every time a merchant is selling his BTC back for fiat, "saylors and "blackrocks" are happy to get them and speculate more with that volume, creating that volatility.
STOP giving them satisfaction. They have endless fiat available to play with huge numbers, numbers that a regular merchant do not have and will suffer more.
STOP dreaming to all kind of bullshit stablecoins or combinations with "payment processors" that could instant sell your BTC for more fiat. That is the MOST STUPID move ever.
Users and merchants MUST start the Bitcoin circular economy and dump fiat as fast as they can and never go back to fiat. DEMAND TO BE PAID IN BTC.
THIS IS THE ONLY WAY!
Who doesn't understand this simple economic game, will be the loser in the end. https://m.stacker.news/46989
Actually its neither. The volatility is mostly ignorance. Fiat moves but has been around for much longer than bitcoin. You've said it many times. Bitcoin is for the brave. I would say those that do the work to understand it look at the fiat exchange volatility as a feature not a bug. We that understand bitcoin know we are stacking sats at a discount today.
The problem with this is that we are a severe minority and regardless of the stupidity of our fellow humans and the ignorance of the masses each economic actor plays a role in the market exchange rates of everything. This includes bitcoin.
1 btc = 1btc. One year of my life is one year. Scarcity is only one side. We each value everything including our very lives subjectively. Bitcoin has no objective value other than 1 btc = 1btc. Subjectively bitcoin is valued very low in purchasing power today. It should be much higher in my view and I'm sure you agree. As more people understand bitcoin they will want to obtain it. As they do the exchange of bitcoin for other goods will drastically change.
What @siggy47 is discussing here is an actual problem and recognizing doesn't have anything to do with the dollar going up or down. Its the market that hasn't learned what bitcoin is and how valuable it is... yet. They will. In the mean time this is an interesting idea. I doubt there is a large enough market for it work today.
What siggy wants is the stablesats offered by the Valet wallet. But is a stupid idea the stablesats. It create even more volatility because of the leverage. It's a vicious circle that never ends.
OK, I'm not up to speed on Valet. I don't think the volatility can be avoided until there is a large number of people actively using bitcoin. I think we are a LONG way from that day. Not because of anything wrong with bitcoin or the software around it. Because of what is wrong with humans. People are slow to learn and adopt new things that require some responsibility. Laziness and lack of curiosity.
No you are entirely wrong on this topic. Volatitly is inherent property of human action and free marked. What you're missing is not about the dollar vs Bitcoin but is about Bitcoin vs commodities. And we are nowhere near even beginning on this way.
And Valet has no leverage yet on the backend. And the leverage will be 1 until we have more robust models and markets.
Slow your roll. I never said volatility could be eliminated. At least that wasn't what I meant to communicate. Volatility is reducing over time as bitcoin becomes more widely understood and traded. I think you are saying the same things I've been saying in this post for what its worth.
I'm not criticizing Valet either. This is the first I'm hearing of it. That was Darth
https://m.stacker.news/47026
Ha!
don't try to fool me. It doesn't work on me your cheap spells....
EXACTLY
?? I don't want stablesats!
https://i.postimg.cc/7LF0qWzw/magic-internet-money.jpg
It is chicken and egg. The need for the service I imagine will disappear. Most merchants who accept bitcoin run to change it to fiat. It does increase volatility, as you say. Volatility will end as adoption increases. It's getting from point A to B is the problem. I picture a small business with a few employees. If bitcoin exchange rate goes up, everyone is happy. The employee might even save some bitcoin at the end of the month. If it dips, the guy can't feed his family. This risk causes the employee to switch to fiat to be safe. If his employer could say "don't worry, if bitcoin goes down this month, you will get the difference payable in bitcoin." It takes away the incentive to switch back to fiat.
It's also about how big balls that small merchant have. In all these 12 years I onboarded many merchants. Not all had big balls to keep their BTC.
But I always advise them this:
Indeed not all merchants understand this game, many are cowards and only look for quick gains, thinking that Bitcoin is kind of "chicken with golden eggs". They are wrong. Bitcoin is only "fuck you money".
Long time preference. People forgot how is to think in long terms. Patience is key.
That's why I always said: Bitcoin is not for the weak, only for the brave.
"Bitcoin is not for the weak, only for the brave" is an absolute truth. And the reason is that they have numbed the brains of ordinary people so much that people still don't understand that the game is not to use Bitcoin to get more shitty dollars, but instead, to use the dollars you have and can get to get as many SATS as you can. But the system knows how to dominate the game, they brainwash you with the face value of the currency, and nobody explains to you how the method of accumulating wealth and energy really works, which ends up leaving you at the mercy of your local currency and those a little better understood take shelter in dollars. And above all, they deceive you with the supposed stability of the currency which only works on its face value, a 100 bill will always be 100! but it will not always have the power to buy 100. This last detail is the key, and ordinary people accustomed to seeing "stable" numbers go into total panic when they see the price of Bitcoin fluctuate. and price is the most important psychological factor when you first encounter Bitcoin and don't understand it yet.
Purchasing power of coins will be volatile even in terms of goods this is why Bitcoin ecosystem needs futures contracts for commodities. However it is not a surprize that the first thing you remembered is dollar.
I like this idea. I do wonder about this though. Currently there are far to few businesses using bitcoin to warrant insurance companies creating this service. As the number of businesses using / accepting bitcoin grows that will increase the ability of this insurance service but it will also increase BTC market price stability.
I think this is a problem that solves itself. Over the years I have come to think Vijay Boyapati perspective on bitcoin from his book is right. Bitcoin will go through phases of adoption and understanding.
Bitcoin's most obvious use case is store of value. People usually see that first and its pretty obvious. People don't always get the medium of exchange due to price volatility and also due to the fact in most developed countries there are good solutions for electronic transactions.
As more people understand bitcoin's store of value value the volatility will decrease. It will never go away. In places where the state has a heavy hand censoring transactions the medium of exchange is already in demand. But as bitcoin is better understood volatility will decrease naturally.
It is so dumb to me that people that have been in bitcoin for years get into arguments about this stuff. It seems rather clear to me. Markets act in very emotional ways in the short term but long term they tend to figure stuff out. Governments around the world keep giving us more marketing material and making bitcoin's use cases more clear.
Now, I'm not saying we don't need to promote adoption or be passive. No, we need to be using the tools and helping developers make sure they work and teaching others. I suspect that when the fiat system collapses it will happen suddenly. Best to be prepared. Both for the ability to help those you love but also as a valuable skill that will be in high demand.
Good analysis. I agree this is an idea that may no longer be necessary by the time there is enough demand for it. It's frustrating to watch stablecoins gain adoption quicker than bitcoin when local fiat collapses. I guess it's all part of the process.
Thanks. I've slowly just landed back on "the bullish case for bitcoin" position coupled with using the tools and trying to increase my own sovereignty personally.
I share your frustration. Maybe there is a way to reduce the barrier. I suspect if it is possible someone will do it.
This seems like something that a btc payment processor could offer. Maybe some sort of protection or guarantee of value based upon the time of the transaction, or a floor on how low things could go.
Yes. That makes sense.
So far, I've never come accross such insurers. I also think that no company would take risk for much a volatile asset as Bitcoin. If they ever plan of doing it. They would have to adjust their premium according to volatility. I mean when the price (in Fiat of course) are up, they would ask for bigger premiums and when the prices are lower, they would charge less.
You can probably DIY some of this volatility insurance by using futures contracts, but that's not a realistic scenario for most business owners.
I also still think that low user demand is the bigger impediment to merchant adoption than volatility. If a merchant is worried about volatility, they can simply price their goods in fiat and sell any bitcoins they earn right away.
No HODL strategy
I agree user demand is the problem. The assumption would be that only businesses truly committed to bitcoin adoption would consider this.
This is called hedging. It is what options and future are for. It exists.
I know. I can't see a mom and pop business owner doing it, though. It can be theoretically outsourced if there is demand.
developers are working on "stable Sats" and such, but markets will develop.
how do farmers do it?
Check out the lively stablesats comments from yesterday! Farmers are a good example. The big operators have hedging abilities. They also have huge government subsidies.
True on the subsidies!
Go leveraged short with a small percentage of your stack. Or just use stable sats or DLC channels.
Leverage would be a tool, but it's probably not something a small businessman would want to do when he can dish off the risk. At least that's my experience. Re stablesats, Galoy's idea has created a culture where a big percentage of those using the wallet really don't want bitcoin, they want dollars. Stablesats perpetuates that, and I don't think it promotes adoption.
I thought it was just traders on the back end. Some are going long and some going short which is how you get the dollar denominated amount of sats.
Maybe traders don't have the success of bitcoin at heart. One might argue that anyone trying to avoid the volatility of bitcoin would be in the same boat.
For a business it might make more sense to start with building their bitcoin reserve first. Then when they've been through a cycle or two the volatility won't be as much of a concern.
Definitely. I'm not saying the idea is viable now, but insuring against the volatility would theoretically allow more bitcoin to be accumulated, since the need to switch into fiat would be alleviated. It reminds me of the old stock market cliche. It's not about timing the market. It's time IN the market.
All the supply chains of the business accepting bitcoin fixes this.
Yes it does. I hope it happens soon.
I don't think this product exists yet but it is a good idea. Multinational corporations that are earning in many different currencies have means to hedge out the currency volatility so I could definitely see this being a need as more businesses being to accept Bitcoin.
Something to discuss with James on Friday I think. He might be more aware than we are of something that exists or strategies companies are using or if he has seen anything being in the Bitcoin VC space being worked on to serve this need.
This volatility would be too much for insurance companies, though. Usually they get small amounts to cover big amounts in the future if there are problems. But if you use bitcoin as an example, when it goes down, everyone would need to be reimbursed. Can you imagine all your clients demanding insurance payouts? I just dont think it would be realistic....
Actuarial science. All risk has a price.
Right, but what would the miminum payment be? Instead they should just use fiat. They can accept bitcoin, but cash it out into fiat right away.
I’m thinking of an investment contract along the lines of:
You don’t like Bitcoin’s volatility?
Ok, I’ll absorb 50% of Bitcoin’s downside in exchange for 50% of Bitcoin’s upside - whichever applies at the point of redemption.
Very good idea. That's the kind of stuff I imagine.
I think that insurance is not necessary. Volatility is our best friend, we just have to understand it! "Volatility down⬇️, leads us to discounts and getting more value ⚡🍊 for less paper" 💵 ... and when we go in the natural direction ⬆️ that is, "Volatility up, our units of value⚡🍊, simply acquire more value." And as has been observed in the past, and in its beginnings, we move strongly in both directions, every certain specific time. We just have to seek to understand the true game to be able to embrace volatility and stop seeing it as something wrong.
The need to accept btc cause its really useful to them
i think Businesses can convert Bitcoin payments into stablecoins like USDT (Tether) or USDC (USD Coin) immediately upon receipt. Stablecoins are designed to have a stable value relative to a fiat currency, such as the US dollar, which helps mitigate the risk of price fluctuations.
I work with a guy based in China and he wants USDT, not BTC.
Tether in the meantime buys US treasuries and makes bank, which it converts to corn.
It benefits bitcoiners, it benefits Tether, it benefits the USG, it benefits people in corrupt countries, and the only one losing out is their corrupt governments.
Yes they can, and they do. I'm looking to find a way, if possible, to prevent them from trading their bitcoin for fiat.
Might be an America only sorta deal cuz insurance is super big in this country and not so much in others
If you're protected against the downside, you're protected against the upside.
One obvious way to achieve that is to drop bitcoin altogether and cuck out on fiat in a savings account.
There are also options strategies, like what the YieldMax ETFs do for stocks.
The reality about price and volatility https://m.stacker.news/47033
So far, I've come to know that Volatility is a bigger concern in the community for any asset. But volatility isn't related to the assets but it's because we have currencies that are governed by governments.
Your thought is great I didn't think that about bitcoin. It's hard to adopt for businesses it is the risky to