It's pretty difficult to stabilize a cryptocurrency the same way as regular currencies are, if just because there is no good way of cutting the money supply. This makes trying to stabilize the price to some set of goods very difficult, because no matter what you pick, you'll have to cut supply somehow, and that just won't work without something akin to a central bank.<p>The internal measures, unfortunately, are very easy to game. Take, for instance, an option that is now being considered among academics for regular currencies: NGDP targetting. It'd be very easy to check the NGDP of a cryptocurrency: It's really just trade volume. So it'd not be difficult to attach a coin's supply increase to the volume. We could pick a currency's codebase and make a competitor that did such targeting withing the day. The problem is that it would not work.<p>NGDP for a real country is fairly hard to game. It's not as if I can suddenly create real economic activity without major costs to myself, at the very least in taxes and fees. The money is also spread enough that such effort would not really match rewards, even in an NGDP targetting regime. In a cryptocurrency though, it's another matter. Transaction costs are tiny for large transfers, and someone with a large balance would be able to create large volume for pennies. Those that would have an easier time doing this are those with a lot of coin, which are exactly the people that would have a lot more to gain from currency manipulation.<p>I lack any mathematical proof that a stabilization system that is based on what a user cares about, expected value of the coin in a few months/years, is not possible. However I'd be very surprised if there was a solution that worked in the case that a few actors control a significant percentage of the coin's supply, and as it is, this is a characteristic shared by every major cryptocurrencies today.<p>What makes things worse is that many cryptocurrency proponents would consider any of this stabilization mechanisms to be undesirable anyway. So even if we found a way, would the many people that believe that devaluation hurts savers be on board? A currency that did manage do behave a lot more like a traditional currency would probably not be what those people want, regardless of what the state of the art in economics believes.<p>So we are back to Betteridge's law of headlines: Any headline which ends in a question can be answered with the word no.
I'm not sure I buy the premise of this article. The supply of Bitcoin in the market is not directly related to the mining rate (the "constant supply" the author refers to) -- instead, it depends on how many people are looking to trade Bitcoin at any given time.<p>Monetary policy is a mechanism to control long-term value of currency, for example to limit inflation or maintain a certain exchange rate with a foreign trade partner. It's not intended to (nor is it able to) damp out short-term fluctuations in foreign exchange markets.
Yes, if stabilizes to $0. With speculation being the main driver behind Bitcoin, it's guaranteed that the price will continue to have big fluctuations.
I've expressed an opinion about bitcoin (and any other cryptocurrency) that isn't popular, but I haven't heard any compelling arguments against:<p>It isn't a currency, it's a transport mechanism for currency.<p>If you approach it from that perspective, the current value of bitcoin is irrelevant. Sure, if a business wants to be paid in btc, then they'll have to dynamically price based on the current value of btc and then immediately convert to fiat...<p>That also makes it a pretty awesome way to do cross currency conversion without much overhead. Want to pay euros for a product priced in US dollars - (somewhat) easily done with btc... and without (some) of the overhead/fees involved in traditional banking/credit cards.<p>Now, if you're looking at it as an investment - well, enjoy the ride... I could have bought 15 btc in Feb 2013 but instead I bought a bitcoin asic miner - that was promised to be delivered by May... and it showed up in October. If I had bought the btc, it and sold it in Nov/Dec 2013... well, I would have been much happier than I was simply breaking even on the miner. (120x happier, in fact) :)