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Crypto Exec Calls Out Altcoin Bias: A Danger To New Investors

Bitcoin analyst Samson Mow cautions that psychological biases are deceiving new cryptocurrency investors. The CEO of Jan3 recently noted that most new entrants to crypto markets are being misinformed by what economists refer to as “unit bias,” leading them to make wrong investment decisions based on the price of coins instead of real value.

Investors Misled By ‘Cheaper’ Altcoins

Inexperienced investors tend to confuse cheaper-priced altcoins as good bargains against Bitcoin, says Mow. “Most alts exploit unit bias by having a very high supply, so people can’t tell what they’re buying,” Mow tweeted on X.

He underscored this confusion with an illustration: “XRP is *only* $2 but Bitcoin is too pricey at $85,000!” This price illusion occurs because most other cryptocurrencies have such much bigger overall supplies than Bitcoin’s hard capped 21 million coins.

The psychological implication causes most fresh purchasers to wish to hold full coins of lesser cryptocurrencies rather than fractional amounts of higher-priced coins.

Unit bias, Mow asserted, is devastating the inexperienced big time, implying that ignorance is damaging newbie investors who aren’t aware of the difference in market capitalization and individual coin price.

Comparing Prices By Equal Supply Shows Different Results

Mow constructed a thought experiment to illustrate how much more extreme cryptocurrency prices would be if they all shared Bitcoin’s limited supply.

According to his estimates, if Ethereum only had 21 million coins (compared to its much greater supply), each coin would have to cost approximately $9,200 – a whopping 278,740% hike from its current price. Likewise, XRP would soar 470% to $5,800 per coin, and Solana would climb 2,325% to $3,400.

“You can purchase one 21-millionth of the supply of BTC for ~$85,000,” said Mow. “What happens if you remove unit bias from alts in order to find the equivalent of 1/21 million?” His conclusion was obvious: “There is no way that these altcoins are worth that much.”

Bitcoin Dominance Higher Than Projected

Bitcoin’s portion of the overall cryptocurrency market has defied expectations by hitting around 60%, as indicated by TradingView data. This indicator, referred to as “Bitcoin dominance,” quantifies Bitcoin’s market capitalization in relation to all other cryptocurrencies combined.

Following recent trends in the markets and his analysis of unit bias, Mow now forecasts that “Bitcoin dominance is going to go much higher” than where it is at the moment or even where the previous expectations stood.

This contrasts with previous predictions which indicated capital would move out of Bitcoin to other cryptocurrencies late in 2024 and early 2025.

Featured image from Capital.com, chart from TradingView



from Bitcoinist.com https://ift.tt/8DscNbR
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