Bitcoin’s Volatility Is Not A Feature

Nor is it a bug. Instead, this one thing constantly drives the popular cryptocurrency’s price swings

I’ve heard it countless times by Bitcoin advocates.

Volatility is a built-in feature of Bitcoin. Not a software bug.

For example, take this quote from Ian Rogers—the CXO at crypto wallet company, Ledger SAS:

Bitcoin’s price volatility is a feature rather than a bug.

But how is that possible?

And did Satoshi Nakamoto — the mysterious and legendary creator of the original cryptocurrency technology — design Bitcoin to be volatile?

I believe Satoshi never intended for Bitcoin’s price to be as volatile as we are seeing it in today’s crypto marketplace.

First off — Satoshi created the cryptocurrency to either be an alternative or a replacement to fiat currencies. The digital money was the first of its kind and took nearly a decade for greater adoption. But it still doesn’t have mass adoption on a scale that can completely replace any nation’s currency.

Next—we must understand the difference between a feature and a bug in software development to understand what is actually happening.

The Difference Between a Feature and a Bug

In the software world, developers plan all features.

They huddle in rooms together or get on Zoom calls, brainstorm exciting ideas, and map out their software’s features on whiteboards.

The developers then take those features and assign them a number value based on the usefulness of a feature, weighing it against infrastructure requirements, usability, and a user’s intended use cases.

I know this, because I worked at a major multinational corporation, where I was embedded in a team that did software development. I wasn’t one of the software engineers. Although I have a brief background in computer programming, I wasn’t technically savvy enough to accomplish what our programmers did with their lines of code.

And I saw it countless times. The lead developers and their scrum teams collaborated on every feature. Researching, voting on them and finally getting leadership approval.

Then my job was to communicate and train users on the new products, their features, and any enhancements.

And what I learned from being so close to software developers is this:

Software code isn’t perfect. It’s created by humans. And bugs do creep in.

Basically, anything that happens abnormally with the software after it’s deployed — other than its intended use cases—is technically a bug and requires the developer to update the code.

Some bugs get fixed immediately. Like when it’s a major problem affecting every user on the platform.

But most of the time, fixing a bug will take weeks or months.

Is Bitcoin’s Volatile Price a Feature or a Bug?

For Bitcoin’s price volatility to be a feature, Satoshi Nakamoto must’ve planned for its existence and baked it into the code.

For Bitcoin’s volatility to be a bug, it means Satoshi Nakamoto didn’t plan for it and write it into the software’s code.

If it was a bug—wouldn’t Bitcoin’s mysterious creator and other developers—want to fix the problem?

After all, wouldn’t it be wise to keep Bitcoin prices at a steady price and ultimately have Bitcoin’s value appreciate at a constant interval?

Well, in fact, Bitcoin’s creator alluded to this very specific scenario.

In a November 8th, 2008 forum post, Satoshi Nakamoto wrote:

The fact that new coins are produced means the money supply increases by a planned amount, but this does not necessarily result in inflation.

If the supply of money increases at the same rate that the number of people using it increases, prices remain stable.

If it does not increase as fast as demand, there will be deflation and early holders of money will see its value increase.

Coins have to get initially distributed somehow, and a constant rate seems like the best formula.

From this quote, it seems Satoshi created and intended for Bitcoin’s price to rise steadily in value—at a constant rate—over time because of the software’s built-in deflationary mechanism (i.e. only 21 million bitcoins to ever be created and distributed at a predictable rate through mining).

Since price volatility was never an intended use case—according to Satoshi’s vision—then does that make it a bug?

Wait just a minute.

Let’s not move so fast.

Nowhere—at least in my research of Satoshi’s original white paper or his hundreds of emails and forum posts—does the Bitcoin creator specifically mention the words volatility or volatile.

This leads me to believe that Bitcoin’s price volatility was never a planned feature.

And if it were a bug, then Satoshi would’ve worked with his developers to implement a fix and correct the underlying code that resulted in the bug.

But to this day, the volatility of Bitcoin’s market price remains.

Which means Bitcoin’s volatility is neither a feature nor a bug.

And if it’s not one of these two things, what is it then?

The True Cause of Bitcoin’s Volatile Market Price

Features or bugs in the source code do not drive the volatile prices of Bitcoin.

Instead, the big up and down swings we see in Bitcoin’s market price are guided solely by this one thing:

People’s greed.

These are the day traders, investors and whales who buy and sell Bitcoin, looking to make a profit from their initial buy positions.

It’s the economics of supply and demand played out in real time in the cryptocurrency markets that push the price up or down.

Nothing else. Not a feature. Not a bug.

The extreme price volatility we see with Bitcoin and other cryptocurrencies is nothing but people trying to get rich from trading.

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