Conventional wisdom suggests that price volatility is one of the main reasons why Bitcoin has not gained greater adoption among the mainstream public. The reality, however, may be quite different. Many people have been drawn to Bitcoin precisely because of its wild price swings.
Think about it. When did you first learn about Bitcoin? Was it from a sensationalized mainstream news story of some kind, say an unsustainable rise in the Bitcoin price, or a recent popping of a short term Bitcoin bubble? It could, of course, have also been crime related: perhaps something about people using Bitcoin to buy drugs on the dark web, or a story about an exchange hack worth hundreds of millions of dollars.
The point is, publicity is publicity. And Bitcoin’s price movements, even in the wrong direction, are exciting. While many may come to Bitcoin for the first time in search of nothing more than a casino game, some may stick around once they start understanding why Satoshi Nakamoto created this peer-to-peer digital cash system in the first place.
Whether the Price Goes Up or Down, User Numbers Go Up
There are a number of different metrics to back up the claim that Bitcoin’s price volatility is a draw.
First of all, just look at the Bitcoin and general cryptocurrency user base as it exists today. How are they interacting with these cryptocurrency networks? According to blockchain analytics firm Chainalysis, roughly 90% of on-chain Bitcoin activity is related to exchanges — that is, speculation around the Bitcoin price.
As you can see in the above chart, the most Google searches for Bitcoin happen during major movements (up or down) in the price of the crypto asset. And this is not just a Western phenomenon, as the chart below shows searches for “Bitcoin” on China-based Baidu have followed a similar path.
Anecdotally, those who create content about Bitcoin, such as myself, can also see what sorts of topics drive the most interest from internet users. If you look at my Forbes contributor page, you can see my most popular articles at the bottom of the page all have something to do with the price of Bitcoin or an altcoin. These are the sorts of Bitcoin-related articles that drive traffic to mainstream news websites.
The general public doesn’t care about Schnorr signatures or sharding. Many care, quite simply, about price.
Finally, the most direct connection between Bitcoin’s price volatility and bringing in more users can be found at the exchanges. Whether the price is heading toward the moon or crashing at an historical pace, you can be sure that exchanges will be seeing a massive increase in the number of sign-ups due to the coverage of its price movements in the media.
The most extreme example of this phenomenon happened in late 2017, when Coinbase literally became the most popular app on the Apple App Store as Bitcoin and a number of other cryptocurrencies were skyrocketing towards all-time highs.
At the end of the day, it’s important to remember that Bitcoin is still in the store-of-value phase of its development, so volatility should actually be preferred by users over the long term (as long as it's in an upwards direction). As Bitcoin gains more recognition as an apolitical store of value, it should become more stable (as it has in the past). Once its value has eventually settled at a certain level, more people may decide they’d also be fine with using it as a medium of exchange.
Until then, Bitcoin will continue to grab headlines with its wild price fluctuations, and those headlines will bring in new users that further strengthen Bitcoin’s network effects — making the cryptocurrency even more useful for everyone involved.