I am only an interested amateur, and my doubt is related to potential legal and regulatory actions rather than to volatility. As ThrustVectoring said, if a government decides to legislate BTC out of existence, or severely limit its usefulness, the game may be over quickly. It does not matter whether the security is crackable or what tricks the exchanges want to use, if the US govt prohibits them from transacting bitcoins anonymously and convinces other governments to follow suit. Then all you will have left is an illegal underground economy. At best this would be like betting on cocaine appreciation, at worst BTC will be supplanted by something more controlled and eventually disappear into some niche underground thing. So, in my mind the main question is the odds of a sweeping regulatory action and its potential severity, balanced against the potential appreciation due to the factors you mentioned, should it survive unmolested. I have no idea how to estimate these odds.
Even if bitcoin goes entirely underground that doesn’t mean it will necessarily be insignificant or “niche.” Internet piracy is black market but not remotely niche—P2P is 98% illegal copyright infringement but it takes up about a quarter of internet bandwidth.
I could see bitcoin thriving in an entirely illegal capacity, being as widely used among some groups as P2P filesharing. Once upon a time people thought filesharing would become insignificant and restricted to a small community of tech-savvy individuals if they just took down Napster and Limewire. But as far as I can tell, illegal filesharing is as pervasive as ever.
The information to calculate such odds is probably inaccessible. The incentive structures of regulatory action is opaque, otherwise you wouldn’t expect to see price swings based on regulatory announcements in normal markets.
I am only an interested amateur, and my doubt is related to potential legal and regulatory actions rather than to volatility. As ThrustVectoring said, if a government decides to legislate BTC out of existence, or severely limit its usefulness, the game may be over quickly. It does not matter whether the security is crackable or what tricks the exchanges want to use, if the US govt prohibits them from transacting bitcoins anonymously and convinces other governments to follow suit. Then all you will have left is an illegal underground economy. At best this would be like betting on cocaine appreciation, at worst BTC will be supplanted by something more controlled and eventually disappear into some niche underground thing. So, in my mind the main question is the odds of a sweeping regulatory action and its potential severity, balanced against the potential appreciation due to the factors you mentioned, should it survive unmolested. I have no idea how to estimate these odds.
Even if bitcoin goes entirely underground that doesn’t mean it will necessarily be insignificant or “niche.” Internet piracy is black market but not remotely niche—P2P is 98% illegal copyright infringement but it takes up about a quarter of internet bandwidth.
I could see bitcoin thriving in an entirely illegal capacity, being as widely used among some groups as P2P filesharing. Once upon a time people thought filesharing would become insignificant and restricted to a small community of tech-savvy individuals if they just took down Napster and Limewire. But as far as I can tell, illegal filesharing is as pervasive as ever.
They are already used in such capacity in the black markets over the Tor network.
The information to calculate such odds is probably inaccessible. The incentive structures of regulatory action is opaque, otherwise you wouldn’t expect to see price swings based on regulatory announcements in normal markets.