Bitcoin Has a Problem, and It's Not What You Think

By johnwege | johnwege | 26 Oct 2024

Bitcoin has a problem, and It’s not what you think.

It’s safe to say that we have arguably entered one of the most bullish periods Bitcoin has ever experienced. Fresh off the hype of the spot BTC ETFs that were approved in January 2024. Bitcoin’s price rose to $74k and made a new all-time high for the first time before the halving occurred.

That, along with the halving occurring in April, sent the Bitcoin market into a hype frenzy, dreaming about just how high Bitcoin’s price could go this cycle. Most were in agreement that this time was different, and all price predictions could be thrown out the window.

The Problem — Unit Bias

With all of that said, there is a problem hiding in sight that most Bitcoiners don’t like to admit.

There is a real unit bias problem with Bitcoin. Most people investing in crypto know that you don’t need to buy a full Bitcoin all at once. Instead, you can buy any percentage you like.

For people who have gone down the rabbit hole of Bitcoin and built their conviction already, we have no issues buying 0.00121 BTC at a time or a similar decimal percentage like this. We are very excited to do so. However, buying that small amount of BTC doesn’t sound exciting for regular retail investors. Instead, they find it much more exciting to buy meme coins or low-cap cryptocurrencies where they can accumulate much more significant amounts of “coins” for the same amount of money. They’re thinking, why would they buy 0.0002 BTC when they could buy thousands of coins for a low-cap crypto instead?

The cryptocurrency market is a place where everyone is trying to keep up with the Robinsons, and vanity plays a much bigger role than we’d like to admit. Buying such a small percentage of Bitcoin makes it feel like they will never be able to accumulate a full Bitcoin. They become depressed and might avoid Bitcoin altogether. But it is the complete opposite when they buy altcoins.

When they can establish portfolio positions with several coins, this makes them feel “rich” and that they have a real chance to make money.

The market having a unit bias is partly responsible for keeping Bitcoin away from all of those bullish price predictions.

This is one of the key benefits of the Bitcoin spot ETFs that were recently approved this year in the US. With the ETFs, instead of buying a certain percentage of Bitcoin, you buy shares. In a way, it is similar to buying stocks but with Bitcoin. However, the key point is that it keeps the price for each share low. Meaning that no unit bias is preventing people from investing in the Bitcoin ETFs.

The Solution

The solution to this problem is very simple and could be the catalyst that finally takes Bitcoin adoption to the next level. However, it will be a very tough pill to swallow for many Bitcoiners.

As I mentioned before, there is a tremendous amount of vanity in owning one full Bitcoin. It is a status symbol and the dream that many want to achieve in this market. The simplest way to get around this problem would be to display the price of Bitcoin in satoshi’s instead of the full Bitcoin.

If people saw that they could buy 400 Satoshis (BTC) for a dollar instead of 0.00001 BTC, that could make a huge difference and make this asset much more appealing to more people. Of course, it would still be important to educate the buyers. Teaching them that each full Bitcoin is made up of 100,000,000 Satoshis. And that when they are buying Satoshis, they are buying Bitcoin.

This option would be the easiest because all that is required would be for exchanges and wallets to change how they display Bitcoin. Displaying it in Satoshi’s would be the first option, and showing it in full Bitcoin would be the second option.

Another option that would be much more drastic and harder to be approved by OG Bitcoiners would be to move the decimal point in Bitcoin. This option would require a fork and would mean massive changes not only for the blockchain itself but the mindsets of its investors as well. If I'm being honest, I don’t think this option would ever be approved, and therefore, we would need to rely on the first option instead.

What it would mean?

The key point is this. The cryptocurrency market is a huge casino where people are trying to make as much money as they possibly can. People look at the price of Bitcoin at nearly $67k and feel that it’s impossible to own a full coin. They also feel that they missed their chance and that there is no longer any money to be made with BTC.

Therefore, they devote their capital to the lower cap projects where they can own a much higher amount of coins. If the price of Bitcoin was displayed in Satoshis instead of a full BTC, I fully believe that a lot more capital would come back into Bitcoin. A bull cycle where people don’t feel intimidated by a full Bitcoin price could result in its price going much further than we could have ever imagined.

Everyone who owns a full Bitcoin loves to look at its “full” price because it makes them feel great. There is a lot of vanity in the BTC unit bias. But that high price could be the very thing that is holding BTC back. Bitcoin is currently priced at $67,000, and that is already out of reach for most people in the world. Sooner or later, this is an issue that Bitcoin is going to need to deal with.