You try to have bitcoin conversations. All you hear is fear, uncertainty or doubt (FUD). You try to explain bitcoins and their eyes light up. Often no-coiner or all-coiner just doesn’t want to hear about bitcoin.
Cognitive bias in the game
Let’s try to understand and understand the cognitive biases that enable FUD and noise. Once these are understood, we can try de-biasing instead.
We define cognitive bias as, “a systematic pattern of deviation from norm or rationality in judgment. From their perception of input, individuals create their own” thematic reality. “
In short, our judgments are often not accurate in predictable ways.
To understand the systematic flaws of human bitcoin judging, let’s start by looking at four biases to the price of bitcoin.
Availability and Resilience bias
“Bitcoin is very volatile!” When the price of Bitcoin fluctuates more than a fraction, every news source has an article, often the language of hysterics. You cannot hide from the availability of that information.
It’s an availability bias, “the tendency of people to think that examples of things that come easily to mind are actually more representative (of truth) than that.”
Articles about the volatility of Bitcoin are also in recent memory. This is the Resilience bias, “a cognitive bias that favors recent events over historic events..One way to reduce availability bias is to look at more information. One way to reduce resilience bias is to view more data over time. If you zoom out and take a long look at more bitcoin price data, the number of prices continues to rise. Lots.
Bitcoin can be volatile when looking at the short term, but over time the rising value of bitcoin increases. “Buy and hold” is the ideal advice for the stock market. Do the same with Bitcoin; Buy and hold or, as Bitcoiners like to say: Hodl. Because in the long run “numbers increase”.
Subsequent unit bias, “The idea that buyers are more tempted to buy a whole unit of a given currency rather than a fraction.” Many people think that they should buy a complete bitcoin. They do not know that the smallest unit of Bitcoin is not 1 BTC; This is 1 “satoshi” (abbreviated “sit”).
100 cents = ড 1
We can say the same thing:
100,000,000 rate = 1 BTC
Buying 0.00034500 BTC seems like a single, meaningless sum because the unit is biased. To de-bias the unit bias, focus only on the smaller units. It’s much more tempting to refer to it as buying 34,500 SAT, even though it’s exactly the same amount of Bitcoin! People should aspire to be SAT Millionaire (0.01 BTC) first and then they will probably attract their attention by depositing a sufficient amount of SAT one day until they have kept the whole bitcoin. You don’t need to look at the small fractions of BTC. Just SAT stack!
Looking at the recent price of Bitcoin, it is easy to anchor at that price and it seems “it’s too late, the price is too high. I should have bought it five or ten years ago.
Anchor bias occurs when “a person’s decision is influenced by a certain reference point or ‘anchor’.”
● Bitcoin at 100: It’s too late to buy Bitcoin
Bitcoin at $ 1,000: It’s too late to buy Bitcoin
বি Bitcoin for ● 10,000: It’s too late to buy Bitcoin
This trajectory actually demonstrates a way to de-bias the anchoring bias. Zoom out and choose a different anchor. You can talk to more people to get a different perspective and a different number of anchors. Or you can look at other similar fields and see that your anchor number should not be a barrier. 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 50,000?
Hindsite bias or “we knew all this”
The next aspect of this is the attitude bias, “the general tendency to make general assumptions rather than to look at past events in reality.”
To know how much the price of Bitcoin will go up, how many people have claimed that it will hit 30,000, $ 40,000, $ 50,000? My bet is that those same people will be quite “knowing” that Bitcoin will eventually reach $ 100,000, $ 150,000, $ 200,000.
Hindsite bias is a bias that all current bitcoins want to experience about the value of bitcoin! No need to de-bias.
Let’s all lead the FUD past
We only saw a set of biases around an area of Bitcoin: price. Other areas to explore include high-profile political, business, and financial statistics perspectives about Bitcoin, such as authority, reactive devaluation, and group or consistent bias.
We can also look at the availability and resilience bias around the often invalid focus on the “E” in the ESG (environmental, social, governance) description, although Bitcoin has huge “S” and “G” advantages. Another area is the ambiguity and bias around functional stability, which influences thinking about the various functions and utilities of Bitcoin.
Most of the misconceptions about Bitcoin stem from bias and noise.
What we can do to better understand Bitcoin biases and free them from bias is to understand better, to accept Bitcoin more, and to see the developed world that Bitcoins are capable of.
Biased or not.
This is a guest post from Heidi Porter. The opinions expressed are entirely their own and BTC, Inc. Bitcoin Magazine.