Bitcoin ETFs are affordable or ‘How unit bias may prolong upward momentum’

One of the often overlooked elements in the emergence of spot Bitcoin ETFs in the US is the renewed sense of affordability of Bitcoin for new investors. Although 1 BTC remains equal to 1 BTC, individuals buying shares in Bitcoin ETFs such as IBIT, ARKB, BRRR, EZBC, and BITB can acquire them for less than $50 each.

While the relative Bitcoin ownership per share indicates that purchasing 1 IBIT share for $33 is approximately equivalent to acquiring $35 worth of Bitcoin, there exists a unit bias that warrants attention.

At present, $35 can secure 0.00052 BTC or 1 IBIT share. Additionally, investors can buy 28 IBIT shares for $1000, which corresponds to 0.015 BTC. In both instances, unit bias may distort investors’ perceptions, leading them to believe there is a significant difference.

Unit bias influencing investor perception

Unit bias is a cognitive phenomenon where investors assess the value of an investment based on the share price rather than its total market capitalization or the intrinsic value of the company. This bias can result in investors favoring assets with lower per-unit prices under the false assumption that they are receiving greater value or that these lower-priced investments possess more potential for growth compared to their higher-priced counterparts.

Investors influenced by unit bias might choose a stock priced at $1 per share over one priced at $1000 per share, perceiving the former as “cheaper” or a better deal, despite the share price being arbitrary and needing to be evaluated in relation to the total number of shares available and the overall valuation of the company. This bias can lead to less than optimal investment choices if it causes investors to ignore more fundamental aspects of the investment’s worth.

This is not the first occurrence of such a phenomenon in the cryptocurrency space, as traders of memecoins frequently favor tokens or coins with lower per-unit prices under the misconception that these are more affordable or have greater growth potential than their higher-priced counterparts.

Unit bias in the cryptocurrency market

Despite its capacity to mislead investors, unit bias has also contributed to the success of certain crypto projects, particularly those with substantial token supplies priced at lower per-unit values. Below are examples and insights into how unit bias has shaped the cryptocurrency market.

Dogecoin serves as a notable example of a project that has gained from unit bias. Originally created as a joke, Dogecoin features a large supply with no cap, resulting in a relatively low per-unit price compared to digital assets like Bitcoin. This low price, coupled with a robust community and viral marketing, has drawn many investors who view it as an affordable investment with the potential for considerable returns, despite its origins and fundamentally different value proposition compared to more established digital assets.

Nevertheless, unit bias also has the potential to democratize investment in the cryptocurrency sector by making it more accessible to a wider audience. The psychological allure of owning “whole” units of digital assets, rather than fractions, can motivate more individuals to engage in the cryptocurrency market, potentially enhancing adoption and liquidity.

While unit bias can result in irrational investment choices, it may also be benefiting Bitcoin due to the low unit prices of Bitcoin ETFs, making them more attractive to a larger audience. Investors may view lower-priced Bitcoin ETFs as undervalued, resulting in heightened buying pressure and a subsequent increase in price. This phenomenon, referred to as the “cheapness heuristic,” can elevate demand for Bitcoin ETFs, perpetuating a cycle of optimistic sentiment.

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