I am a money saver, and I'm trying to save money away from the control of the Brazilian government. Because cryptocurrencies are easily available, it’s easy to transfer them, it’s easy to deny the full amount of cryptocurrency I’m holding, and the government can’t seize my money before seizing me first, they were the option that looked best for this purpose after seven years of consideration. My first purchase was done in June of 2020 and I never gave advice to close relatives to get some because the volatility could imply that I would make someone lose considerable amounts of money, something utterly irresponsible to do. Even though I was always fully aware of the unreliability of the Brazilian Real ($BRL), and became more painfully aware of it as I saw its value against the US dollar ($USD) to halve in four years, I still did not recommend cryptocurrencies as protection against that. I did not understand what was going on or why the price had such wild fluctuations, so I stayed away from it.
I seek cryptocurrencies for reasons that are quite different than the ones that Bitcoin enthusiasts have pandered over the recent years. I do not expect the price of the cryptocurrency I hold to surge. I just expect it to keep its value, in a boring and well-behaved way. I have done nothing to deserve more money, and I would only tolerate a surge in the cryptocurrency I hold if it’s derived from a rejection from the other fiat currency that is being used as reference (which could be the case for the $BRL, but it is not the case for the $USD, as least not in a pace as fast as the price of cryptocurrencies are rising).
I have not hopped the cryptocurrency train even though I was fully aware of it as early as 2013. Trying to get easy money, without producing enough to compensate for the earned money, is the path that leads to a social collapse. Money is only worth something when there are goods being produced and services being provided, and if everybody is trying to get easy money, there is nobody in the factories working for making the goods to be sold nor there are people available for doing services that need to be done.
Volatility is useful for gamblers that see exchanges as casinos where they can ride roller coasters while pushing their luck and misleading others that cannot read the details of the market data. I myself got a bit drunk with greed when seeing the cryptocurrency I held suddenly surge in value, then drop, then surge. Fortunately I've snapped out of it, became sober, and sold all of my cryptocurrency into fiat. That unexplained surge allowed me to increase my hard-earned savings from US$ 1500 to US$ 2300, but that's not why I picked that particular cryptocurrency. I picked it because that was a boring but reliable cryptocurrency, which is now ruined by speculators.
Why is volatility an undesired thing in the real world? They are an annoyance for both savers and borrowers. Savers need stability, because they do not want their money to lose value over time due to inflation. Borrowers need stability, because they do not want the repayment value of a pending loan to suddenly spike. I was so concerned about the deflation effects to borrowers that I even planned in advance that loans denominated in cryptocurrencies should have a “deflation cap” clause, limiting the amount of pain that sudden surges in the cryptocurrency price could lead to.
Ampleforth has the idea of elastic supply for addressing volatility, which works as follows: if the price of Ampleforth changes, currency holders have their savings increased or decreased in a way to counter the effects of that change, leading to no losses because of inflation and no gains because of deflation. As their example explains, if I had purchased one Ampleforth when the price was $USD 1.00, and the price of Ampleforth has dropped to $USD 0.50, the balance of my account is increased to counter the effects in the change of price, so I get one more Ampleforth, leading to having again $USD 1.00 in Ampleforth in my balance. If the price doubled, my balance is halved. I lost nothing, I got nothing. A boring and well-behaved currency.
Ampleforth is an experimental currency, so I would recommend anyone getting into this to be careful, but it’s interesting to see cryptocurrencies trying to address economic problems largely ignored by the other ones.
