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Comment by Aqueous | Hacker News Reader

The more people who use BitCoin the less volatile it will be, the more BitCoin tokens will be spread across a large number of individual actors, the less a single actor can dictate price fluctuations.

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This is among the most ridiculous statements I have heard about how the markets work. Its actually the exact opposite, the lesser the people the lesser the fluctuations/volatility. And this is not just about the markets, it applies to most things. ex:

1. Single drug company selling the life changing drug = High near-fixed-global price | As soon as more drug companies can sell increase price competition, higher variance in generic pricing, different rates globally

2. All company valuations remain relatively steady until an IPO

3. If a man/woman suddenly gets a lot of suitors their current relationship if less than optimal may crash and burn , in the absence of alternatives the relationship may have a better chance of survival.

Those examples are a joke. What about the volatility of big cap vs small cap stocks. Isn't that more relevant than suitors and relationships?

1. The point on suitors and relationships was meant as a joke but is a relatively easier example to use when explaining a concept to the layman.

2. Big cap vs Small Cap != Necessarily More Relevant (its relevant to the principle of volatility, but requires more complex understanding. This understanding is absent for the OP of comment thread I replied to - to explain further the presence of market makers, prop desks/professional traders, institutional block trades, quant. systems, availability to borrow shares to short, short sqeezes etc. that are present in large cap equities/futures/opts markets reduce volatility and skew the data towards the hypothesis that more owners reduces volatility. A number of these influencer's make the topic relatively more complex to understand for a layman and the people who feed them information aka news media).

The transition from an oligopoly/monopoly to a market where price is dictated by competition is different than the transition from few competitors to more competitors.

Perhaps a better way to say this would be: The more money on each side of the market, the less volatility, since it will take a much larger amount of money to move the market.

For comparison, the foreign exchange markets do trillions of dollars every day in volume. The daily volume of Bitcoin trading is around $100 million at times.

What makes you think that? I'm not convinced of either of your suppositions, i.e. that 1) current fluctuations are caused by large bitcoin owners who dictate the price, and 2) that having many small investors would lower volatility (think about crowd behavior...)

Yes, I believe if someone sells a large quantity of BitCoins at once it can trigger a big sell-off.

Certainly groups of two or three who all sell fairly large quantities of BitCoins around the same time, even just by coincidence, can trigger a panic sell-off.

The more BitCoins are distributed are among more people the less a few people selling can snowball into a price collapse.

BitCoin already seems to be much less volatile than it was even a few months ago. The up-and-down fluctuations are a much smaller percentage of the price. In the last few days it's been hovering around $1200, without falling below $1100 or rising above $1300. A year ago it was routine for BitCoin to lose half its price and then recover and then lose half again.

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