Is volatility going to be a fatal problem for Bitcoin?

It’s true that Bitcoin’s value is volatile, and that creates headaches for users. But experience so far suggests that it might be a manageable problem.

The Bitcoin startup Bitpay provides a good example. The company helps thousands of merchants accept Bitcoin payments for their goods and services. Bitpay customers price their products in conventional currencies such as the dollar. When a customer makes a purchase, Bitpay automatically converts the transaction to an equivalent Bitcoin price. When Bitpay receives the payment, it can immediately convert the funds to dollars and deposit them in the merchant’s conventional bank account. Hence, Bitcoin’s volatility isn’t a problem for Bitpay’s customers. Insulation against price fluctuations is part of the value Bitpay offers to merchants.

Bitcoin’s volatility will be a serious problem for anyone who wants to make financial transactions priced in bitcoin. But there are a lot of possible applications that can use Bitcoin as the medium of exchange while prices are set in a conventional currency such as the dollar.