How to think about crypto currencies and their ups- and downs?
Crypto currencies are not currency
The one argument I hear the most against using crypto currencies as payment method is their volatility and how it’d be incredibly difficult for anyone to continually check the current price mark and adjust the price of their goods accordingly.
There’s a reason cryptos are that volatile, though. They’re not based in anything other than people’s trust and speculations in them and since there’s not much else to do with it currently, other than invest and play the game of speculation it will remain that volatile for a while.
Crypto currencies are just another product
It’s important to realise that right now, Bitcoin and other crypto currencies are not viewed as a currency, but rather as a product itself. The more value is put into a product the more it’ll be worth, simple. It still doesn’t have anything to do with volatility and the the way it’s viewed as a currency or not, just the current worth.
However, as the currency grows (in uses, not in value) the more goods are price checked towards it and the more weight it will carry, making it less likely to jump up and down as much. So, the more physical things it’s attached to it the less volatility we’ll see. This is the market naming its price.
Once this product become convenient for more parts to use as a token of trades it’ll stop being considered a product and instead become the standard method of counting the value of other products.
The real difference is that should this happen to Bitcoin, I believe it will be a lot more stable than any of the current fiats that we use to buy milk and bread with today. The reason for that is that it will be built on real trust, between normal people. It won’t be guaranteed by a state with a monopoly on violence but rather by the trustworthiness and previous reputation of the next person. What’s good about this is the price will always match the public’s trust in the currency. With fiat and state-owned currency, the guarantee is the state and its ability to use force against people who questions the current currency’s value.