Why Bitcoin is Volatile aka I Told You So

This is exactly what Ripple is attempting to solve, acting as a open, global payment network where transactions are nearly free and you can use any currency (including bitcoin) you want. More at https://ripple.com/about-ripple/.

I put some money into Bitcoin recently. I'm speculating.

Bitcoin only gets its value from scarcity if you look at it from the context of a traditional currency.

It's volatile because there is a lot of speculation going on; there is a lot of speculation going on because nobody has figured out how to value it against a traditional currency yet (in other words: speculation transactions outweigh productive transactions e.g. the proverbial alpaca sock).

While there is scarcity - and said scarcity is driving speculation - the intrinsic value of btc derives from the cryptographic trust in the validation of the Bitcoin blockchain, and the promise that a btc will always be accepted as a bounty on the validation of a btc transaction.

It's fundamentally different than the promise inherent in traditional currency: that a unit of currency must be accepted for the repayment of debt. Instead, a unit of currency must be accepted as a bounty on the cryptographic assurance that a transaction is not fraudulent.

What defines trust in a system, and when does that come in to play in the valuation a system?

With a satoshi sent to an address that cannot spend its balance along with the cryptographic signature of a document, you can execute a proof of existence. Distributed, mathematically validated notary.

It can also be used as a decentralized, trust-based escrow system.

The value inherent in a single btc is more abstract than a brick of gold, and has more to do with Bitcoin itself.

Bitcoin is maturing from a small stock to a growth stock then a value stock. But in comparison with other currencies, simply retaining its value is better than some fiat currency holdings and it is a wonderful hedge against it as long as it can hold its value. It could even go down but at a slower rate than nation currencies and still be useful as a hedge.

Some people are treating it as a stock currently expecting huge upsides, adoption will bring that but eventually it will calm down and if it just retains value over time it will beat out most fiat currencies.

There is obvious value to fiat currencies and inflation for fueling investment (I need to grow my shrinking dollars) but it is always nice to hedge in case.

No, my arguments do not fall down. You are making the terribly flawed assumption that bitcoin will always be this volatile. Bitcoin is less volatile than it used to be, and with greater adoption will continue to decrease in volatility.

The volatility in bitcoin today is nothing compared to 2011. Is it still bad ? Yes. Will it continue being bad ? Probably not. The long term trend supports the assumption that volatility will decrease with greater adoption.

Furthermore volatility has little effect on the 'money transmission' element of bitcoin as long as transfers and conversions take place immediately. It's still a viable way to legally move USD from the USA to Singapore with very low fees.

Another example, I'd like to add is that I had a large part of my savings in Indian Rupees. They depreciated by 30% over the past 2 years. That's definitely pretty bad but it didn't prevent me from buying coffee. Euros have also swung around by 15-20% over the past 2-3 years. The Brazilian Real lost 25% of it's value last year. Does that make them as bad as bitcoin ?

Your motivation for getting into bitcoin is your personal choice and I certainly hope that you profit from it. However, don't forget that bitcoin is an emerging technology going through fairly rapid adoption, as such, volatility, crashing exchanges, bubbles, bubble pops, etc. will be a part of it. And of course, I have to convert money from USD to BTC. Or from Marks to Euros. Or from escudos to Euros. That's just how it works.