Ask HN: Why is Bitcoin so volatile?

Imagine you have 1M shares of your smallish company's "public" OTC stock, last traded at $0.10. Nice, you've got $100K right?

Usually that is until you try to sell. Your first sale might go off at $0.09 due to the spread, 1000 shares later and it's already $0.08, 10,000 shares later $0.07, etc or worse. You've chewed through the bids quickly and ended up with a lot less money that you thought you were going to get. The solution of course is to use a limit order - it won't guarantee you get a sale, but it will guarantee your price won't be compromised on any sale that occurs.

This can quickly happen on the buy side too; an increase in demand can lead to a rapidly increasing price. That's why "penny stock" newsletters are fertile ground for pump and dump schemes.

As a currency, bitcoin fits the "penny" category. Major currencies transact perhaps trillions of dollars per day. Bitcoin market participation is microscopic in comparison.

Bitcoin was designed to be a currency, a means of immediate exchange, however it is becoming more and more apparent that people are using it as a short term (possibly long term) investment.