Bitcoin analyst Samson Mow raises alarm bells for new cryptocurrency investors, cautioning that psychological biases are deceiving many in the volatile landscape of crypto. As the CEO of Jan3, Mow explains that many newcomers are misled by a phenomenon known as unit bias, which clouds their judgment by focusing on the price of coins rather than their real market value.
Investors Misled by ‘Cheaper’ Altcoins
Mow points out that inexperienced investors often perceive cheaper altcoins as better deals when contrasted with Bitcoin. He highlights that many alternative cryptocurrencies exploit unit bias by having an exaggerated supply. This discrepancy makes it challenging for novice investors to understand the true worth of the assets they are considering. “XRP is *only* $2 but Bitcoin is too pricey at $85,000!” Mow tweeted, illustrating the psychological pricing trap that many fall into.
The psychological implications of unit bias lead new investors to desire whole coins of less expensive cryptocurrencies, rather than fractional holdings of higher-priced currencies. Mow unequivocally states that this bias is “absolutely detrimental” to untrained investors, emphasizing that ignorance and misunderstanding surrounding market capitalization are wreaking havoc on their investment decisions.
Comparative Price Analysis: A Thought Experiment
To shed light on how significantly these biases skew perceptions, Mow devises a thought experiment that examines cryptocurrency prices if all digital currencies operated under Bitcoin’s limited supply. If Ethereum had only 21 million coins compared to its current vastly greater supply, each coin would roughly price at $9,200—representing a staggering 278,740% increase from its current value. Similarly, XRP’s price would rise by 470% to $5,800, while Solana might escalate 2,325% to $3,400.
“These calculations,” Mow explains, “are derived from dividing the market cap of altcoins by 21 million, reframing their supply in terms of Bitcoin’s exclusivity.” Through this lens, Mow underscores a vital reality: “There is no way that these altcoins are worth that much,” after accounting for their inflated supplies and market cap discrepancies.
Bitcoin Dominance Surpasses Expectations
Notably, Bitcoin’s dominance in the cryptocurrency market has recently exceeded expectations, currently hovering around 60%, as reported by TradingView. This metric, known as Bitcoin dominance, measures Bitcoin’s market capitalization relative to all other cryptocurrencies combined. Given recent market developments and Mow’s analysis of psychological biases, he foresees Bitcoin’s dominance soaring even higher than anticipated.
This marks a significant shift from earlier predictions that suggested capital would flow away from Bitcoin towards alternative cryptocurrencies by late 2024 and into early 2025. Mow’s insights present a critical perspective on the evolving dynamics of the cryptocurrency marketplace, especially regarding the risks posed to new investors.
