Bitcoin Is Too Volatile

It can't succeed as money.

Bitcoin is too volatile.

Money needs to be stable.

Bitcoin’s volatile price swings cause uncertainty for producers and consumers when using it as a unit of account, medium of exchange, and store of value. How are you supposed to use Bitcoin as money if its value can swing 10% from day to day?

Rebuttal:

Bitcoin is in “price discovery” mode. The market is figuring out what Bitcoin is worth in a world of infinite fiat. Imagine there was no volatility in this phase, and Bitcoin only went up in price in a direct line. What would happen?

Everyone would pump and pour as much money in as possible, people would take out loans, and many would add in huge amounts of leverage to their trades. All of a sudden, a massive bloated bubble of speculation has formed due to greed.

Eventually, there would be so much bloat and leverage thrust onto Bitcoin that the slightest downturn in activity would cause speculators to capitulate, leading them to lose money that they never actually had. As the leveraged nonsense gets unwound, the price falls significantly, at which point an increasing amount of those who entered into the market as speculators exit due to fear, further pushing price downward, and further wiping out any mal-investment.

It’s not possible for Bitcoin to not be volatile at this stage. The nature of *the* monetary solution emerging from absolute zero results in two main things:

1) There will be lots of money coming into that solution

2) There will be lots of people buying into that solution that don’t really know what they’re buying, particularly in a fiat world that incentivizes speculation and the desire to get rich quick.

As lots of money enters into Bitcoin as a result of its monetary brilliance, more and more people who don’t understand Bitcoin will throw money at it. This will push the price higher, but… it will make the market more fragile.

Bitcoin has seen this cycle take place multiple times. Bitcoin issuance cuts in half (the halving that happens every 210,000 blocks), making new supply more scarce, driving up price as demand outpaces supply, leading to massive bull runs, speculation, leverage, and greed, and then, piece by piece, the tide washes out, and the market finds who’s swimming naked.

As speculators get wiped out, price plummets, a bear market ensues, and Bitcoin keeps trudging along, only to reach another halving, starting the process over again.

Bitcoin halved in 2012, price rocketed to all-time highs and beyond in 2013, only to see a huge price drop in 2014. The same thing happened in 2016 (the second halving), 2017 (ensuing bull run) and 2018 (bear market wiping out speculation). And again in 2020, 2021, and 2022.

Here we are, in 2025, after Bitcoin's most recent halving in 2024...

Volatility is inevitable along Bitcoin’s price discovery journey. What does happen, with each passing cycle, however, is that more and more people gain a fundamental understanding of the Bitcoin thesis, leading them not to become speculators, but savers.

More people save in Bitcoin today than four years ago, and four years prior to that, and four years prior to that, all the way back until genesis. As baseline awareness of Bitcoin grows and as more liquidity finds Bitcoin, the fluctuations in price stabilize. Drawdowns are smaller, recoveries happen faster, and volatility dampens.

Maybe the argument isn’t that Bitcoin is volatile, rather, Bitcoin is too volatile. You don’t value the U.S. Dollar in Bitcoin (you should go look up “USD to BTC exchange rate chart” on your internet browser, it will be quite the pitiful case for fiat). But yet, most of the market is valuing Bitcoin in the USD or some other fiat currency. Which is perfectly fine – that’s the stage Bitcoin is in, as of this writing.

Bitcoin is being used as money in some instances, but it certainly is not the dominantly-used form of money. Bitcoin is too volatile at this stage, perhaps, but once it stops being valued in other currencies, its value will be its purchasing power in the real economy, in other words, how many real goods and services you can buy with BTC, without having to go through an exchange rate of another currency.

At that point, it will be the supply and quality of goods and services that determine the value of BTC, not how many pieces of paper are able to be exchanged for it. Both of those things - supply and quality of goods and services - have continuously gone up over time... what does that tell you about Bitcoin? Hint: up = up.

Why will Bitcoin stop being valued in other currencies? Because eventually, nobody will be willing to give you their BTC for your fiat. Thus, BTC will stop being valued in fiat. This will be discussed later in the book, but if you look hard enough, it’s already heading that way, which is why it keeps getting costlier to get somebody else’s BTC for your fiat.

If you zoom out of Bitcoin’s short-term volatility, it actually is only going up in price, and, in that sense, is not volatile. The USD price of BTC at each halving:

2012 halving: $13

2016 halving: $664

2020 halving: $9,734

2024 halving: $63,750

That’s not volatility, that’s a monetary signal screaming through the noise.

Bitcoin’s volatility isn’t a flaw, it’s a necessary function of its monetization phase. It’s all part of the process. The market is metabolizing a once-in-a-civilization monetary solution amidst an ocean of financial chaos. Bitcoin started as a very small wave in that ocean, of course it will experience chaos. But, with each passing cycle, volatility dampens, conviction grows, and Bitcoin matures. The Bitcoin wave becomes bigger and bigger, until the wave becomes the ocean. At that point, we have reached the monetary singularity.

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This is a direct excerpt from my book, The Bitcoin Thesis.

More to come.