[ad_1]
Source: author’s modification of 43/1995 from goodfreephotos.com
You are trying to have the Bitcoin conversation. All you hear is fear, uncertainty, or doubt (FUD). You try to explain Bitcoin and their eyes go glassy. Often times, no-coiners or alt-coiners just don’t want to hear about Bitcoin.
Cognitive biases at play
Let’s try to figure it out by examining the cognitive biases that allow FUD and noise. Once these are figured out, we can try de-biasing instead.
We define cognitive bias as “a systematic pattern of deviation from the norm or rationality in judgment. Individuals create their own “subjective reality” from their perception of the entry. The construction of an individual’s reality, and not the objective input, can dictate his behavior in the world. “
In short, our judgment is often not predictably accurate.
To understand the systematic errors in people’s Bitcoin judgments, let’s start by looking at four biases around the price of Bitcoin.
Availability and recency bias
Source: Drawing by Heidi Porter
“Bitcoin is too volatile!” When the price of Bitcoin changes by more than a fraction, every news source has an article, often in hysterical language. You cannot hide from the availability of this information.
It is an availability bias, “the human tendency to think that examples of things that easily come to mind are more representative (of the truth) than they actually are.”
Articles on Bitcoin’s volatility are also in recent memory. It is a recency bias, “a cognitive bias that favors recent events over historical events.” One way to reduce availability bias is to look at more data. One way to reduce recency bias is to look at more data over time. If you zoom out and look at more bitcoin price data, the number of prices is constantly increasing. A lot.
Source: @DanHeld Twitter
Bitcoin can be volatile for a short time, but the price of bitcoin steadily increases over time. “Buy and hold” is standard advice when it comes to the stock market. Do the same with Bitcoin; buy and keep. Or, as Bitcoiners like to say: Hodl. Because “The numbers are increasing” over the long term.
Bias unit
Source: mohemed_hassan on pixabay.com
Next comes the units bias, “the concept that buyers are more likely to buy an entire unit of a given currency instead of a fractional amount.” A lot of people think they have to buy an entire bitcoin. They don’t know that the smallest unit of bitcoin is not 1 BTC; it is 1 “satoshi” (“seated” for short).
We know:
100 cents = 1 dollar
We can also say:
100,000,000 rate = 1 BTC
Buying 0.00034500 BTC seems like a paltry and unnecessary amount due to the unit bias. To mitigate unit bias, simply focus on the smallest unit. Qualifying it as buying 34,500 sats is much more appealing, even though it is exactly the same amount of bitcoin! People should aspire to become a sat millionaire first (0.01 BTC) and then focus on maybe one day accumulating enough sats until they hold an entire bitcoin. It is not necessary to visualize your holdings in tiny fractions of BTC. Just stack the sats!
Anchor bias
Looking at the recent price of Bitcoin, it’s easy to peg into that price and think, “It’s too late, the price is too high. I should have bought it five or ten years ago.
Anchor bias occurs when “an individual’s decisions are influenced by a particular point of reference or ‘anchor’. “
● Bitcoin at $ 100: it is too late to buy bitcoins
● Bitcoin at $ 1,000: it is too late to buy bitcoin
● Bitcoin at $ 10,000: it is too late to buy bitcoin
This trajectory in fact demonstrates a way to debase the anchoring bias. Zoom out and choose another anchor. You can also talk to more people to get a different perspective and anchor on a different number. Or you can also look into other similar areas and see that your anchor number doesn’t have to be an inhibitor. If you look at the stock market, was it too late to buy when the Dow was at 15,000? If bitcoin goes to $ 100,000, was it “too late” to buy bitcoin for $ 50,000?
Retrospective bias or “We knew it from the start”
Then comes the retrospective bias, “the common tendency of people to perceive past events as having been more predictable than they actually were.”
Source: geralt on pixabay.com
How many people have claimed to know that the price of bitcoin will increase dramatically, that it will reach $ 30,000, $ 40,000, $ 50,000? My bet is that these same people will be fairly “knowing” that bitcoin will eventually hit $ 100,000, $ 150,000, $ 200,000.
Looking back is one that all current Bitcoiners would love to know about the price of bitcoin! No need to debuff.
Let’s lead all the people beyond the FUD
We only looked at one set of biases around one area of bitcoin: price. Other areas to explore include biases such as authority, reactive devaluation, and intra-group or compliance biases when it comes to the view of prominent political, business and financial figures on bitcoin.
We can also examine the availability and recency bias around the often non-factual emphasis on the ‘E’ in the ESG (environment, social, governance) narrative, although bitcoin also has huge ‘S’ advantages and “G”. Yet another area is that of biases around ambiguity and functional fixity, which affect thinking about the various functions and usefulness of Bitcoin.
Most of the false criticism of Bitcoin comes from bias and noise.
Understanding Bitcoin’s biases and what we can do to eliminate them is a path to better understanding, further adoption of Bitcoin, and the better world that we Bitcoiners believe will allow.
Bias or not.
This is a guest article by Heidi Porter. The opinions expressed are entirely theirs and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
|
Sources 2/ https://bitcoinmagazine.com/culture/bitcoin-price-bias-investing The mention sources can contact us to remove/changing this article |
[ad_2]