The Volatile Way: A Guide to Embracing Volatility in Bitcoin - #305

TL;DR - Embrace Bitcoin's volatility as a natural market dynamic. Learn to price in BTC, understand its value, and integrate it into daily life for financial sovereignty.

Reader

People hesitate to use bitcoin due to volatility.

Their heads spin from tracking price charts and market movements. Unbeknownst to them, we already live in a volatile world. Everyday, the prices of goods and services rise and fall. No one bats an eye because it's in a currency unit they're familiar with. They've embraced the rollercoaster of market prices without realizing it.

For better or worse, the Exchange-Traded-Funds (ETFs) are accelerating market dynamics. These funds, backed by large corporations through customer investments, have significant access to capital. Volatility shows interest in the marketplace. It's a natural phenomenon. The difference being instead of individual buyers and sellers, there are now ETFs.

The price swings are bigger, meaner, but rewarding.

It's what happens when limited supply meets unlimited demand.

Understanding Volatility

At its core, market volatility is the dance between what the seller wants and buyers willing to pay. It's a dance influenced by how much product is available (supply) and how much people want it (demand).

You go to your favorite coffee shop. There's a shortage of coffee beans due a missed shipment, but people still want their morning cup. Because of the demand, the price of coffee goes up. The supply is low, but demand is high. The coffee goes to the highest bidder. Likewise, if there's more supply, but little demand, the price might drop.

It's a natural and efficient occurrence without the need for central planning.

The market, then, is not simply an array, but a highly complex, interacting latticework of exchanges. In primitive societies, exchanges are all barter or direct exchange. But as a society develops, a step-by-step process of mutual benefit creates a situation in which one or two broadly useful and valuable commodities are chosen on the market as a medium of indirect exchange. - Murray N. Rothbard

Individual choice and subjective value are important when determining demand. It gives signals to producers in judging where the demand for supply is in the market.

Price fluctuation happens in all markets, not only in bitcoin.

Volatility is a sign of a healthy free market of individual choices and preferences.

Embrace Volatility

Many already embrace volatility without knowing. The prices of fuel, food, and entertainment all fluctuate.

Let's take the price of fuel as an example...

One day, you're paying $3 USD at the pump, next its $3.25 (a 8.33% increase). During the summer season, gasoline prices increase to $4 USD (+23.08%) or even $5 USD (+53.85%). You already see and experience the price volatility in your daily life. Bitcoin is no different.

When you enter in bitcoin and the fiat price drops, some people panic. They panic because their short term expectations met with reality. Rather than thinking of "gains" or "riches," manage expectations and understand your "why."

Bitcoin is a tool. The tool is sovereign money. Money that you control. Money that you can use anytime, with anyone, anywhere without permission.

Be in bitcoin. Expect, and embrace, volatility.

Shifting Perspective

To reduce the price volatility a bit, consider pricing goods and services in bitcoin. It's a novel approach but it's a fundamental shift in how we perceive value.

Thinking in bitcoin encourages us to move beyond traditional fiat currencies. It helps us foster a deeper understanding of what price and value mean in our everyday life.

Learning to Price in Bitcoin

1. Check the market price. Use sites like CoinMarketCap or CoinGecko to check the price of Bitcoin.

2. Think in sats. Thinking in atomic units of Bitcoin makes smaller transactions more practical. Example: 1 BTC = 100,000,000 sats.

3. Practice. Look at the goods and services you use. Divide their price by the price of bitcoin. Example: gas $3.55/$70,000.00 USD = 0.00005071 BTC or 5,071 sats. Practice daily. Make it a habit.

4. Follow Examples. Look for businesses where pricing in bitcoin is already happening.

Daily Use

Using bitcoin everyday is revolutionary. It brings us closer to the ideas of free markets and individual sovereignty.

Bitcoin transactions challenge the inefficiencies of traditional finance's distorted economic signals. Reducing the cost of transactions makes for a more efficient market. Resources get allocated according to true preference instead of manipulated central bank policies.

Individuals using bitcoin ensure their property rights and liberty. It helps them lower risk of confiscation and devaluation by bad state policies. This kind of financial autonomy helps enhance personal freedom. Greater freedom allows for a more genuine expression of supply and demand.

By opting out of fiat currency, individuals and businesses opt into a bitcoin economy. The bitcoin economy is a parallel one made of voluntarism and free exchange. The free exchange creates markets free from coercive state influence.

All one needs to do, is embrace the volatility.

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