When in doubt, zoom out.
On larger timescales, this isn't really that much of an issue.
Volatility is also trending downwards. The bigger it gets, the more stable it becomes.
On larger timescales, this isn't really that much of an issue.
Volatility is also trending downwards. The bigger it gets, the more stable it becomes.
To be clear, there is no mechanism, logic or reason (at least revealed to me) why this would be true. Vice versa, increased amount of trading typically increases volatility.
If that's the case, then bitcoin owners will only dump their holdings if a) they fear that the bitcoin network is about to collapse for some reason or b) they need to put the value stored in those bitcoins to use.
Define amount. If you mean number of trades, then the effect is decreased standard deviation if the average trade is smaller as a percentage of total market capitalisation. That seems completely logical.
See: pretty much every study in to HFT.
The mechanism is that you get flows hitting both sides simultaneously (56 buyers vs 44 sellers) that tend to cancel out, instead of a single player (3 buyers vs 1 seller or vice versa) dominating the flow.
BTC volatility will go down as adoption goes up.
I don't think it's at all clear that Bitcoin adoption will go up. It's never been useful as a currency for most people, and Tesla aside, merchant adoption has been in retreat for years. KYC/AML laws are reducing its utility for financial crime. Its only real advantage is in speculation and market manipulation. But both of those depend on volatility.
Large cap stocks weren't engineered for stability, but they're lower tail-risk than mid cap stocks, which are lower tail-risk than small cap stocks, and so on.
The same phenomenon has been broadly true across all markets over all of human history, and the underlying mechanism (heterogeneous flows) is well understood and rather intuitive.
Whether or not BTC adoption increases is not relevant to what I was saying. My only claim is that volatility will decrease if adoption increases, counter to the misplaced scepticism of the post I was replying to
If BTC adoption decreases instead, then volatility should increase, ceteris paribus.