One of the more underappreciated aspects of the rise of spot Bitcoin ETFs in the US is the renewed perceived affordability of Bitcoin among new investors. While 1 BTC still equals 1 BTC, investors purchasing shares in Bitcoin ETFs like IBIT, ARKB, BRRR, EZBC, and BITB can do so for under $50 per share.

While the relative amount of Bitcoin owned per share means that purchasing 1 IBIT share for $33 is roughly equivalent to buying $35 worth of Bitcoin, there is a unit bias at play that needs addressing.

Currently, $35 can buy you 0.00052BTC or 1 IBIT share. Further, investors can purchase 28 IBIT shares for $1000, or 0.015 BTC. In both scenarios, unit bias can skew investors’ perspectives into believing there is a difference.

Unit bias affecting investor sentiment

Unit bias is a psychological phenomenon where investors perceive the value of an investment based on the unit price of its shares rather than its overall market capitalization or the company’s intrinsic value. This bias can lead investors to prefer assets that are priced at lower per-unit costs under the mistaken belief that they are getting more value for money or that these lower-priced investments have more room for growth compared to higher-priced options.

Investors affected by unit bias might opt for a stock priced at $1 per share over one that is $1000 per share, thinking the former is “cheaper” or represents a better value, even though the price per share is arbitrary and needs to be considered in context with the total number of shares outstanding and the overall valuation of the company. This bias can lead to suboptimal investment decisions if it causes investors to overlook more fundamental aspects of the investment’s value.

This is not the first time we’ve seen such a phenomenon in crypto, as memecoin traders often prefer tokens or coins priced at lower per-unit costs under the mistaken belief that these are cheaper or have more growth potential than higher-priced assets.

Unit bias in crypto

Despite its potential to mislead investors, unit bias has also played a role in the success of specific crypto projects, particularly those with large token supplies priced at lower per-unit values. Below are examples and insights into how unit bias has influenced the crypto market.

Dogecoin is a prime example of a project that has benefitted from unit bias. Initially created as a joke, Dogecoin has a large supply with no cap, leading to a relatively low per-unit price compared to digital assets like Bitcoin. This low price, combined with a strong community and viral marketing, has attracted many investors who perceive it as an affordable investment with the potential for significant returns despite its origins and fundamentally different value proposition compared to more established digital assets.

However, unit bias also has the potential to democratize investment in the crypto space by making it more accessible to a broader audience. The psychological appeal of owning “whole” units of digital assets, rather than fractions, can encourage more people to participate in the crypto market, potentially increasing adoption and liquidity.

While unit bias can lead to irrational investment decisions, it may also be helping Bitcoin due to the low unit prices of Bitcoin ETFs by making them more appealing to a broader audience. Investors may perceive lower-priced Bitcoin ETFs as undervalued, leading to increased buying pressure and a subsequent price rise. This phenomenon, known as the “cheapness heuristic,” can drive up demand for Bitcoin ETFs, perpetuating a cycle of bullish sentiment.

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