The heuristics often described in behavioral economics provide an insightful framework for understanding mainstream resistance to Bitcoin.
This is an editorial by Rich Feldman, marketing executive, author, and advisory board member at Western Connecticut University.
behavioral economics It has long been cited to explain our “irrational tendencies” as consumers and investors.I am here to extend that argument specifically to Bitcoin. Because when it comes to cryptocurrencies in general, and bitcoin in particular, the impact of emotions, prejudices, heuristics, and social pressures on shaping our preferences, beliefs, and behaviors is profound…and fascinating.
As described in behavioral finance, everything It is easy to fall into common “traps” such as fear of missing out (FOMO), loss aversion, groupthink (the “bandwagon” effect), and the sunk cost fallacy. These can cause investments to be held for longer than necessary.
There are certainly interesting parallels between the concepts of behavioral finance and Bitcoin. For example: FOGI ( “Old model), or fear of getting ofChalk it up to the nascent trading market which can be incredibly confusing and (for many) require a technological leap.
But who thinks this new The launch of online banking, bill payments and mobile deposits shows that consumers are hesitant whenever they venture into new technology. As such, FOGI paralyzes “crypto curiosity” from taking the actions (aka learning and discovering) required to actually participate in the asset class.
moreover, recency bias It certainly helps explain much of the Bitcoin ecosystem’s revolution. Estimate The almost certain repetition of recent events can easily be associated with the seemingly ever-present volatility.
Access to the 24-hour market only exacerbates this, peak end rule Recent intense positive or negative events (or “peaks”) have the greatest impact on how you remember how certain things were experienced, and thus can disproportionately influence decisions in the near future. There is a possibility
Time discounts and the YOLO effect
But among all the biases and heuristics I find useful to explain The mainstream perception of Bitcoin today is that temporary discount — This is the tendency to perceive future desired outcomes as less valuable than present outcomes — this is the most prescient. And he adds the YOLO effect — “you only live once” hedonism and future “blindness” — into the mix and you have a powerful crypto cocktail.
It’s human nature for those who say, “I don’t know where this is going,” especially those in the “it’s not there, it’s there” camp. try Imagine where it’s going. Focusing on the present, I try to frame what exists based only on what I can identify, interpret, and internalize. now.
These are the same types of people who asked “Why do we need this?” when mobile phones were first introduced. They could never have predicted that mobile technology would lift the developing world, become central to the entire payments industry, and fundamentally change telecommunications. Temporary discounts are common. In fact, this phenomenon can extend to disastrous proportions of retirement savings across wide swaths of the population.
Inability to imagine the future, or simply uninterested in doing so, “I want to create shortcuts to understand and explain the future”why?in combination with “illusion of control” Heuristics, or the belief that we have more control over the world than we actually do – there is no belief that technology has a world of promises or a desire for leaps of trust.
The Story of “Old New Technology”
Another interesting psychological point of view can be summarized as follows. Bitcoin was introduced to the world in January 2009 by Satoshi Nakimoto. At that point, it was a groundbreaking and revolutionary idea. But today there are literally thousands of blockchain protocols and projects, many of which have surpassed Bitcoin in practicality and promise.
Or, put another way, Bitcoin is old new technology. the form of Availability heuristicwhich captures our tendency to bias the information we recall quickly and easily to frame our opinions.
Proponents of this point of view argue that Bitcoin’s rejection of a proof-of-stake consensus mechanism (and its myriad reasons), centralization of mining power, and small developer community compared to others.
Opponents of this point of view have to laugh. 14 years is not “old”. This technology has stood the test of time rather admirably compared to others. Blockchain innovation continues to move forward with cross-chain bridges, ordinal numbers, lightning networks, and more.In fact, the stability, permanence, and security of Bitcoin kept it The forefront of this new ecosystem.
In short, when you are first you are inevitably compared to others All.
Inflation hedge confirmation bias
For quite some time, the narrative around Bitcoin as an investment has been that it is a “hedge against inflation.” If so, “digital gold”.
Many would argue that this common wisdom has been debunked – at least for now. is. After all, the idea of Bitcoin itself was born out of the previous financial crisis. At the time of writing, Bitcoin is showing its mettle at a time when banks like Silicon His Valley Bank (SVB), Credit His Swiss, Silvergate and others are under extreme threat.
The popularity of the inflation hedge narrative is one example. confirmation bias —or our tendency to uphold existing beliefs. Bitcoin’s original reason for existence was pushed aside (by some) optimism biasPeople continue to underestimate the possibility of experiencing negative events.
And even without a catastrophic systematic implosion, that potential alone opens the door to give vast new footprints to this new storehouse of value.
When it comes to Web3, crypto, blockchain, and Bitcoin, I admit there is a bit bias.It can be chalked up as It is the belief that the fundamental attributes of Bitcoin technology – decentralization, self-management, ownership and control – will change in ways we cannot fully comprehend today.
In other words, if you think there is no there, it may be because you cannot imagine what it is.
unreasonable? Let’s talk 10 years from now.
This is a guest post by Rich Feldman. Opinions expressed are entirely his own and do not necessarily reflect those of his BTC Inc or Bitcoin Magazine.