<p>The Bitcoin price is the result of a free market. There is no central authority that could by order "pump money into the system".</p>

<p>This currently happens anyway - but decentralized. When more people buy Bitcoins the market cap increases. With a higher market cap a single trade has a lesser effect on the price. Therefore, over time when Bitcoin attracts more users and investors, volatility will go down. There is no need for a centralized intervention.</p>

<p>Bitcoin can also be compared to small cap stocks or currencies of small countries. These types of assets are known for their high volatility. Large cap stocks on the contrary show a significantly smaller volatility due to the above stated reasons.</p>

<p>For a more in depth treatment of these arguments, read this article on <a href="http://bitcoinmagazine.com/6543/bitcoin-volatility-analysis/">Bitcoin volatility</a>.</p>

CC BY-SA 3.0
2013-11-11T19:56:08.093Z
I did not say I want a "central authority" to pump money into Bitcoin... I just said if money is pumped into it (= more people buy Bitcoin) it could be less volatile. Edited question accordingly.
Kozuch
CC BY-SA 3.0
2018-02-18T14:14:06.857Z
What if there was a built-in mechanism that would limit the number of transactions? like they do in the stock market when prices have high volatility.
rraallvv
CC BY-SA 3.0
2013-11-10T00:23:06.840Z
2013-11-10T00:23:06.840Z
Radoslav Albrecht
<p>Even commodities or stock with large trade volumes are still prone to price shocks. The <a href="http://stockcharts.com/freecharts/historical/djia1900.html" rel="nofollow">Dow Jones Index</a> for example, isn't a smooth line.</p>

<p>Often governments on the behalf of taxpayers in the wider economic environment will <a href="http://online.wsj.com/news/articles/SB122341269244912563" rel="nofollow">pump money</a> into a crashing market to stabilise prices ("buyer of last resort"). Whether you believe this to be a good thing depends on your economic ideology<sup>1</sup> and who exactly is benefiting and at what moral hazard.</p>

<p>The exchange rate is going to stay volatile until after all the Bitcoins hoarded by early adopters are flushed out into the wider economy.</p>

<p><sub>1. Ha Ha. You think the mainstream schools of economics are <em>scientifically rigorous</em>? No pundit wants that, so 21st century economics is banished to academia. Our creaky hobby-horses limp along like superstitions.</sub></p>

CC BY-SA 3.0
2013-11-21T11:57:26.313Z
"The exchange rate is going to stay volatile until after all the Bitcoins hoarded by early adopters are flushed out into the wider economy." Is this ever going to happen?
Kozuch
CC BY-SA 3.0
2013-11-12T03:01:09.587Z
2016-06-17T09:27:20.087Z
2016-06-17T09:27:20.087Z
LateralFractal
<p>The way to reduce volatility is by giving a greater incentive to profit (and lose) from volatility. Options do this by rewarding trades that best follow discovery of the true market prices of the underlying product. Time to expiry allows leverage choices. The options are also market participants, so the effect is to stabilize prices while rewarding the best trades. The large bitcoin exchanges don't offer options trading. </p>

CC BY-SA 3.0
2013-11-09T18:57:56.223Z
2013-11-09T18:57:56.223Z
user7636
<p>Bitcoin has a deterministic supply and an uncertain demand, so its value will always be volatile, regardless of its market capitalization. You can read a more detailed explanation in <a href="https://gist.github.com/fernandonm/81cb21bdce0910055de32b98ee4119e1" rel="nofollow noreferrer">this article</a>.</p>

CC BY-SA 4.0
2022-04-29T07:47:59.770Z
2022-04-29T07:47:59.770Z
Fernando N.
<p>I believe that more money will be there in bitcoin, more stabilized it will be to big buys/sells.</p>

CC BY-SA 3.0
2013-11-12T10:49:18.097Z
Downvoted, because this is not an 'expert answer', it is only an opinion without supporting arguments and as such not useful.
Murch
CC BY-SA 3.0
2013-11-09T18:39:01.003Z
2013-11-09T18:39:01.003Z
blogger
<p>Is it possible to stabilize exchange rate(s) of Bitcoin to FIAT currencies (USD, EUR etc.) and make the rates less volatile only by raising the market capitalization (more people buy/invest in Bitcoin so it will be less vulnerable to big buys/sells) or are there other options?</p>

CC BY-SA 3.0
2013-11-10T01:52:56.533Z
There is another crypto currency called Freicoin, that tries to diminish in value in order to encourage spending: "Fees are taken for holding coins and distributed to miners. " https://en.bitcoin.it/wiki/Freicoin
jeorgen
<currencies><exchange-rate><market>
How to stabilize Bitcoin's exchange rate (reduce volatility)?
Kozuch
# How to stabilize Bitcoin's exchange rate (reduce volatility)?

(Asked by: username_0 on 2013-11-09)

Is it possible to stabilize exchange rate(s) of Bitcoin to FIAT currencies (USD, EUR etc.) and make the rates less volatile only by raising the market capitalization (more people buy/invest in Bitcoin so it will be less vulnerable to big buys/sells) or are there other options?

**Tags:** currencies, exchange-rate, market

> **Comments:**
> **username_1**: There is another crypto currency called Freicoin, that tries to diminish in value in order to encourage spending: "Fees are taken for holding coins and distributed to miners. " https://en.bitcoin.it/wiki/Freicoin  

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## 5 answers

### Answer by username_2 on 2013-11-10. Score: 8

The Bitcoin price is the result of a free market. There is no central authority that could by order "pump money into the system".

This currently happens anyway - but decentralized. When more people buy Bitcoins the market cap increases. With a higher market cap a single trade has a lesser effect on the price. Therefore, over time when Bitcoin attracts more users and investors, volatility will go down. There is no need for a centralized intervention.

Bitcoin can also be compared to small cap stocks or currencies of small countries. These types of assets are known for their high volatility. Large cap stocks on the contrary show a significantly smaller volatility due to the above stated reasons.

For a more in depth treatment of these arguments, read this article on [Bitcoin volatility](http://bitcoinmagazine.com/6543/bitcoin-volatility-analysis/).

> **Comments:**
> **username_0**: I did not say I want a "central authority" to pump money into Bitcoin... I just said if money is pumped into it (= more people buy Bitcoin) it could be less volatile. Edited question accordingly.  
> **username_3**: What if there was a built-in mechanism that would limit the number of transactions? like they do in the stock market when prices have high volatility.  

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### Answer by username_4 on 2013-11-12. Score: 4

Even commodities or stock with large trade volumes are still prone to price shocks. The [Dow Jones Index](http://stockcharts.com/freecharts/historical/djia1900.html) for example, isn't a smooth line.

Often governments on the behalf of taxpayers in the wider economic environment will [pump money](http://online.wsj.com/news/articles/SB122341269244912563) into a crashing market to stabilise prices ("buyer of last resort"). Whether you believe this to be a good thing depends on your economic ideology1 and who exactly is benefiting and at what moral hazard.

The exchange rate is going to stay volatile until after all the Bitcoins hoarded by early adopters are flushed out into the wider economy.

1. Ha Ha. You think the mainstream schools of economics are *scientifically rigorous*? No pundit wants that, so 21st century economics is banished to academia. Our creaky hobby-horses limp along like superstitions.

> **Comments:**
> **username_0**: "The exchange rate is going to stay volatile until after all the Bitcoins hoarded by early adopters are flushed out into the wider economy." Is this ever going to happen?  

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### Answer by username_5 on 2013-11-09. Score: 2

The way to reduce volatility is by giving a greater incentive to profit (and lose) from volatility. Options do this by rewarding trades that best follow discovery of the true market prices of the underlying product. Time to expiry allows leverage choices. The options are also market participants, so the effect is to stabilize prices while rewarding the best trades. The large bitcoin exchanges don't offer options trading.


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### Answer by username_6 on 2022-04-29. Score: 0

Bitcoin has a deterministic supply and an uncertain demand, so its value will always be volatile, regardless of its market capitalization. You can read a more detailed explanation in [this article](https://gist.github.com/fernandonm/81cb21bdce0910055de32b98ee4119e1).


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### Answer by username_7 on 2013-11-09. Score: -1

I believe that more money will be there in bitcoin, more stabilized it will be to big buys/sells.

> **Comments:**
> **username_8**: Downvoted, because this is not an 'expert answer', it is only an opinion without supporting arguments and as such not useful.  

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