Cameron Winklevoss on Bitcoin’s Price Volatility: No Reward Without Risk

One of the main criticisms of Bitcoin as a currency has been price volatility. While most people are attracted to the low costs and quick settlement offered by the blockchain, those same individuals do not like the idea of holding on to an asset that has sometimes lost large chunks of value within short periods of time.

Price volatility has definitely been an issue for mainstream adoption up to this point, but Gemini cofounder and president Cameron Winklevoss does not believe this problem will last forever. At SXSW Interactive 2016 in March, Winklevoss claimed, “[Price volatility] is less and less an issue every day.”

Bitcoin Is Not a Mature Market

Winklevoss was interviewed alongside his brother Tyler by Freemit CEO John Biggs at SXSW, and he was happy to answer questions related to trends in Bitcoin’s price. In Winklevoss’s view, one of the main problems currently holding back price stability is the fact that Bitcoin is not a mature market with advanced hedging methods. He explained:

“It’s not yet a mature market. It does not have mature hedging tools. Equity markets are volatile, but there are always ways to hedge with derivatives. There are all sorts of instruments that don’t exist in Bitcoin yet. There’s really no way to express a lot of positions, so right now, Gemini is just a spot cash market for buying and selling. You can’t short. You can’t buy futures, derivatives or swaps. All of these things you come to see in a mature financial market. I think it’s just a matter of time.”

Regulatory Uncertainty Affects Price Volatility

Although Winklevoss believes Bitcoin is on a path toward clearer regulation, he believes that, in the past, regulatory uncertainty has caused issues related to volatility for the digital currency. He stated:

“There was a point where every other day there [were things like] the U.K. says Bitcoin is okay and Russia banned it. That makes things volatile, and that’s to be expected when something is so new-fangled and young.”

Anyone who was a part of the Bitcoin community in late 2013 will remember all of the booms and busts for the digital currency around that time, which seemed to be caused by regulatory announcements coming out of China. Winklevoss’s point is that it’s hard for Bitcoin to retain a stable value when the market is unsure whether lawmakers intend to ban ownership of the digital asset.

No Risk, No Reward

One last point Cameron Winklevoss made in regard to Bitcoin’s price volatility was that this isn’t much of an issue for individuals who view the digital commodity as a store of value or digital gold. For these Bitcoin users, long-term movements in price are much more important than short-term volatility.

While Winklevoss conceded that the value of Bitcoin is relatively volatile right now, he also pointed out that the risk-reward dynamic associated with the digital currency changes over time. Winklevoss explained:

“It’s going to start looking older, but also, the older it looks, the less opportunity there is. There’s no reward without risk. If you get into Bitcoin five years from now, it’s not going to be the same risk-reward profile as it is today.”

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