Is bitcoin volatile?

The question is often asked, isn’t bitcoin volatile?  In bitcoin’s 5 year history (January 2009 to December 2013, as of this update), there have been a number of instances of volatility.  The question is though, which do you prefer:  an asset/currency that is increasing in value even though it is volatile or an asset which is continually losing value?

  • Since 1913 the dollar has lost about 95%-97% of its value in gold and silver terms.
  • According to the Federal Government’s Bureau of Labor Statistics’ Consumer Price Index inflation calculator, a dollar in 1913 had the same buying power as $23.59 today, a greater than 95 percent decline.  Just between 1970 and 2013, $1.00 in 1970 had the same buying power as $6.02 today.  Even since 1990, one dollar in 1990 had the same buying power as $1.79 today – that is nearly 40% of its value being lost!
  • Each time there was volatility, the track was upwards.  Starting at being essentially worthless, one bitcoin is around $1000 in early December 2013.

Inflation eats away at the savings of regular people, hurting the poor and middle income people the most, although hurting everyone a lot.  Politicians like inflation because it is a hidden tax which takes money from people and redistributes it to the politically connected.  For a group of people who claim to have the welfare of the citizens at heart, you would not know it based on their policies.  So, while bitcoin may be volatile, it is volatile in a positive direction compared to the value of the dollar which is negative.

Other currencies such as the Yen, Euro, and other currencies have had similar declines.  You can explore the loss of value of paper/fiat currencies over time with the fxtop calculator.


The Value of the Dollar over time:

U.S. Government Bureau of Labor Statistics Calculator