Gold and Silver price drop related to Bitcoin?

Posted by Rob on 18 April 2013 | Comments

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Big swings in the dollar price of Bitcoin has been a problem for people trying to use it as a currency. However the problem only exists when we measure the worth of a Bitcoin against another currency.

"Wild swings in the recent value of Bitcoins have caused some to question whether the virtual currency is intrinsically flawed."

BBC clearly asking the question if Bitcoin is flawed due to the price variation. Having said that, Gold isn't fairing any better at the moment...

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An early Bitcoin adopting retailer, selling tea, was put off by early swings in the Bitcoin dollar price - and this was when the price fluctuated by a single dollar or two! Movements of a hundred dollars in a few days is what we are currently faced with.

Ripple is a new coin that has been pre-minted with a view to prevent this wild fluctuation in price. It will be interesting to see how they get on. To use ripple you will probably have to agree to pay for a "Ripple" (XRP) what ever price that the ripple guys set. Then the guy you are sending your ripples to will be able to get his currency out the other end, presumably at the same rate.

They are also looking to implement an integrated exchange of some kind, i wonder if the fact that the price of a ripple will be fixed is what that idea is about.

So how is the wild fluctuation of the price of a Bitcoin solved? one of the most popular idea amongst Bitcoin enthusiats is Friction:

Friction: This is the default answer for most bitcoin enthusiasts, and I believe I have heard Gavin himself espouse this view, although I can't find the quote. If enough merchants and businesses support bitcoin, it becomes harder and harder for the price to swing around wildly, because there are so many goods and services available for buying and selling denominated in bitcoins. Friction stability is a long LONG way in the future, if it ever happens at all.