BullionCoin Introduces Much Needed Stability
To be considered a safe digital currency, BullionCoin also needs to counter the main & consistent problem that plagues cryptocurrencies, which is volatility.
Cryptocurrencies can have huge percentage changes which can easily move more than 10% one day and then 20% in the other direction the next day. Moves more than 30% up & down each day are not uncommon.
Such extreme levels of volatility makes the whole market unsuitable for trading as a mainstream form of currency or to be used as an asset that can be safely relied upon to store wealth.
In currency terms, velocity refers to the rate at which its monetary base / capitalisation changes hands (turned over) each day.
The higher the velocity, the higher the liquidity at any point in time which enables the currency's ability to absorb the volatility associated with buying and selling.
This means that:
- Low velocity translates into high levels of price volatility
- High velocity translates into low levels of price volatility
In the case of cryptocurrencies low velocity is created mainly due to speculation that their prices will go up, which is why they are being held for profit and not used for transactional purposes the way traditional currencies are.
BullionCoin has built-in characteristics that incentivises high velocity. This is one of several reasons that enables BullionCoin to defy Gresham's Law.
Due to the BullionCoin's ability to be redeemed in exchange for the physical precious metals backing it, the coin's price will never likely drop below the spot price for physical gold or silver otherwise the market will be in a position to buy physical precious metals at a discount.
The ability to redeem ensures that any volatility down is restricted by a floor dictated by the spot price of allocated gold and silver.
The actual price appreciation, in the form of premiums, will occur in BCX's secondary retail market.
This premium will effectively be the retail margin on top of the primary markets' wholesale price + the value that investors place on the coin's seamless capability to transfer title of ownership over the bullion across international borders, in the form of a currency transaction.