A balancing account is an idea that I have. Some variation of a spending & saving account could conceptually be created. They would contain an equal amount of bitcoins and USD when adding funds to it. This could be used to maximize savings and minimize spending. If the price of bitcoin has fallen since making a deposit, then spend cash on the current purchase. If the price of bitcoin has risen since making a deposit, then spend bitcoin on the current purchase. This will ensure that the user always made money of their deposits before spending.
Arbitrage is when investors buy a bitcoin from one exchange at a lower price and sell it at another price for a higher price. This balances the price between the exchanges. It can be profitable for the investors engaged in this activity. It is a risk, though. If the price is crashing before they make the buy and sell, then they will lose money.
The price of a stock depends on the value of the service that the business provides. Bitcoin is an extremely valuable service. The value of this service will be reflected in the price of a single bitcoin and in the value of the businesses surrounding bitcoin. As long as the 51% of the servers is not taken over by a malicious attacker, then bitcoin should retain some value. Even if the 51% attack was to happen, there would be a fork that the rest of the community would start moving forward with. The network is not theoretically impenetrable but in practice, it is impenetrable.
Companies are afraid to hold onto bitcoin that they receive because it could go down by 20% in the next few days. That would make them lose money on a sale. An insurance to cover volatility could be created. It could be commission based on the fluctuations. The insurance company would collect a percentage of the increase in value in an exchange to cover the dips in value. This would take the risk out of a crash for some companies that may hold bitcoin.
Insured Bitcoin Accounts
There are currently insured accounts available at some exchanges. I’m sure more will grow. They are responsible for any bitcoin that was lost or stolen because of them. This includes hackers attacking their systems. It does not include someone getting ahold of your username and password. Also, they usually have 2 factor authentication so they would need your password and either your email or cellphone authentication. Authentication would be done by sending an e-mail with a confirmation link or sending a text message with a confirmation code that needs to be entered into the site before a transaction can take place. Fund that are stolen from a traditional debit card are usually not insured. However, funds stolen off of a credit card are usually covered by the credit card company. Those funds come from the consumers through fees and high interest rates. The problem with insurance is relatively easy to address for Bitcoin. Corporations will provide this service. They will need to make a profit for that service, so bitcoin holders that choose these services will probably pay for them. Some companies make their profits through other ways that will offload the costs to the customer.