Cryptocurrency volatility will decrease for gold, says Vitalik Buterin

Cryptocurrency volatility will decrease for gold, says Vitalik Buterin
Cryptocurrency volatility will decrease for gold, says Vitalik Buterin

Ethereum co-founder Vitalik Buterin was recently interviewed about the state of cryptocurrency markets and the future of blockchain technology.

He predicted that the volatility of the cryptocurrency market will decrease towards that of gold and equities in the medium term – although he does not know at what price this is likely to happen.

In an interview with blogger Noah Smith, Vitalik said he was surprised that the current bear market for cryptocurrencies did not kick in sooner than it did.

Although the prices were high, he was sure they would eventually drop – he just didn’t know exactly when.

“It seems like people are reading a lot about what is ultimately the cyclical dynamic that cryptocurrencies have always had and will likely continue to have for a long time to come,” he said.

The cryptocurrency has historically experienced four-year market cycles, in line with the roughly four-year halving of Bitcoin’s bid issuance fee.

While the price floor of bitcoin has risen steadily in each cycle, so has the asset’s percentage return in each boom.

As such, Smith asked Vitalik if this means Bitcoin is following an adoption curve, where the market eventually saturates and mimics the price stability of gold. The developer agreed.

“I definitely think that in the medium term, cryptocurrencies will stabilize and be as volatile as gold or the stock market,” he predicted.

While he doesn’t know where cryptocurrency will saturate, Vitalik said the asset class is answering more of his “existential questions” over time.

In other words, as its established use cases and role in the market solidify, so does the certainty of what the potential limits of cryptocurrency are.

As an example, Vitalik suggested that cryptocurrency could replace gold as a store of value and become a “Linux of Finance” by 2020, but it may not become mainstream.

This scenario reduces the chances that the cryptocurrency will “disappear or completely dominate the world in 2042”.

In April, Vitalik said he does not expect cryptocurrencies to replace traditional currencies.

Switching to Ethereum

Ethereum is scheduled for “The Merge” update in September 2022 – its permanent transition to a proof-of-stake consensus mechanism.

The Ethereum Foundation says the upgrade will make Ethereum more efficient, secure and scalable.

According to VItalik, proof-of-work is bad for the environment and less secure than proof-of-stake, an opinion that is controversial within the market.

Due to the energy required to defend the network, miners must constantly be rewarded with new coins to fund the security of the protocol.

In the case of Bitcoin, miners are almost entirely rewarded for their energy expenditure on newly issued bitcoin.

As bitcoin’s block subsidy declines over time, miners will become more reliant on transaction fees to subsidize security.

“If Bitcoin really comes under attack, I hope that the political will to move to at least a hybrid proof-of-stake appears quickly, but I expect it to be a painful transition,” Vitalik concluded.

What is your opinion? Leave it in the comments section below.

Read more: US bans Tornado Cash, Ethereum mixer


The article is in Portuguese

Tags: Cryptocurrency volatility decrease gold Vitalik Buterin

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