Seven deadly psychological hurdles to reaching bitcoin maximalism

We’ve all heard the regurgitated arguments against bitcoin: You can’t hold one in your hand. There is no intrinsic value. It’s pure speculation. It’s a Ponzi scheme. It will be hacked. It can be copied. It’s used by criminals. It will be banned by the government. It’s controlled by the government. Quantum computing will destroy it. It uses too much energy. It’s too slow. Nobody accepts it as payment. It’s too volatile. Transaction fees are too high. Transaction fees are too low. What happens if the internet goes down? What happens if Earth gets hit with a gigantic EMP?

All of these concerns can be refuted with logic and reason, and aren’t the focus of this article. Instead, I’d like to shed some light on a few psychological hurdles that people might struggle with, while on the inevitable path to bitcoin maximalism. Some of these hurdles are rarely discussed, in part because the person who is dealing with them might feel embarrassed to recognize them internally, let alone admit them publicly. And yet, they can be significant obstacles standing in someone’s way of adopting bitcoin, until they eventually capitulate at a later date, and regrettably, a higher cost.

These hurdles can motivate someone to continue arguing against bitcoin, even while battling the cognitive dissonance of having those arguments repeatedly debunked, and the value of bitcoin continuing to rise. The goal of this article is to help people recognize their own hidden motivations, so that they may work through them to obtain freedom and financial salvation through bitcoin.

1. Portfolio tinkering

While most people don’t want to have to think about investing, preferring to spend their time and energy doing other things, this isn’t the case for everyone. It may or may not surprise you to learn that some people actually enjoy it. There are folks out there who love to spend time staring at spreadsheets and pie charts, meticulously curating their diversified investing portfolio, so that it feels just right. It’s a never-ending task, because some investments will rise while others fall, and constant rebalancing is in order. If the strategies ultimately end up being successful, it can feel rewarding. It will seem that the work paid off.

For someone who enjoys this kind of activity, bitcoin maximalism can seem quite unappealing. It’s too simple and easy to be any fun. When considering investing in cryptocurrency, this person might gravitate toward a diversified portfolio of various tokens instead.

Unfortunately for them, the most rational crypto portfolio looks like this:

Not only is this the ideal cryptocurrency portfolio, but it turns out that this is also pretty close to the ideal long-term holding strategy more broadly, among all assets.

While an asset manager or investing hobbyist might begin with a large portfolio of equities and eventually introduce a 1% bitcoin position, the more that person learns about bitcoin, the less those equities make sense. Sure, value creation through business is important, but not at a time when the globe is experiencing the rapid approach of hyperbitcoinization. From a rational investor’s perspective, nothing comes close to competing with the relevancy of bitcoin’s path to world domination. Only after it occurs, can attention reasonably be returned to allocating capital for productive business ventures. In the meantime, portfolio tinkerers should try to appreciate the freedom that bitcoin maximalism provides, and search for a new hobby.

2. Cheering the underdog

Most people can appreciate a David and Goliath story. Don’t you just love supporting the little guy, the dark horse, the long-shot, the unlikely hero? Doesn’t it make you feel so warm and fuzzy?

Enter reality. Without divine intervention, 99 times out of 100, David is not a man of legend, but a statistic. Nothing special, merely one of the many men slain by Goliath.

If a high school basketball team went up against the ‘95-’96 Chicago Bulls, you could root for the high schoolers as much as you want, but it wouldn’t change the result. If a bicyclist challenges a Ferrari driver to a road race, you could fantasize about how awesome it would be for the bicyclist to be victorious, but that’s not going to happen. At least, you shouldn’t put your money on it.

There are many out there who will try to excite you about the possibility of ethereum, litecoin, dogecoin, or some other shitcoin triumphantly surpassing bitcoin. This is not a time to let your emotions get the better of you. Use logic, and recognize bitcoin’s dominance for what it is. There is no second best.

3. Avoiding the bandwagon

If an attraction to underdogs is one side of the coin, then a desire to avoid bandwagons is the other. Look, I get it: if someone was a fan of the New England Patriots and then suddenly switches to become a fan of the Kansas City Chiefs, it doesn’t exactly feel like honorable behavior.

A similar practice is observable in investing. There are people who seem to always be piling into the hottest stock on the stock market, drifting from Amazon to Apple to Tesla to Nvidia. More prudent investors will often watch these momentum-chasers and scoff condescendingly. In fact, the more careful capital allocators will sometimes go so far as to avoid the hottest stocks altogether, and instead look for contrarian opportunities. They reason that the most popular investments are more likely to be over-crowded, and susceptible to a pullback or crash.

Occasionally, this abstinence proves to be a mistake, and the popular stock continues to rocket higher for years on end, based on significant, fundamental strengths that led to its popularity in the first place. To prevent this mistaken avoidance, one must be able to identify such fundamentals, and in the case of bitcoin they exist on a revolutionary scale. Bitcoin’s relentless, meteoric rise in little more than a decade should serve as primary evidence of this fact to any skeptic.

There is wisdom in the adage “if you can’t beat ‘em, join ‘em.” In the monetary arena, bitcoin is the apex predator, and it isn’t at risk of being beaten any time soon. Monetary networks are a winner-take-all game, therefore it’s unwise to be searching for contrarian opportunities. Bitcoin can never be “over-crowded,” and its addressable market is the world’s savings—this is not the bandwagon you want to avoid.

4. The sunk cost fallacy

The sunk cost fallacy is, by definition, irrational behavior. It describes the tendency to follow through on an endeavor or course of action if you have already invested time, effort, or money into it, whether or not abandoning it would be more beneficial. This cognitive bias can be a giant obstacle between people and the financial salvation of bitcoin maximalism.

For example, someone who has made the mistake of investing time and effort into learning the details about various crypto-tokens can be influenced by this fallacy, causing them to be reluctant to trade away their shitcoins for more bitcoin. Likewise, someone who studied traditional finance or holds a portfolio of traditional assets like stocks, gold and real estate, which they’ve built up over many years, might dismiss the idea of converting a large portion of it into bitcoin as a reckless choice. However, these feelings don’t logically imply anything about what the ideal strategy actually is, and therefore it’s best to ignore them in favor of more solid reasoning.

5. Perpetually missing the boat

If someone on the sidelines watches the value of an asset increase tenfold, it can be a tough pill to swallow to decide to buy it at the higher price. “It’s so expensive now, I guess I missed the boat,” they will say. “Maybe I’ll get some if the price comes back down.”

Then if the value increases tenfold again: “Wow, I guess I didn’t miss the boat the first time after all. But I’ve certainly missed it now!” These poor souls always seem to be missing boats.

Bitcoin is not a boat. Bitcoin is a gondola lift operating in a continuous loop. It transports anyone and everyone out of the dark valley of inferior financial systems, up to the beautiful mountain of a new and better one. It goes up forever. You can’t miss your ride, there’s always another cable car coming up behind you, ready to seat you.

Sure, it would have been ideal if you had taken your seat earlier, and arrived to the superior system sooner. Those who did, benefited greatly. But that’s not a good reason to remain frozen in the valley, sulking, envious of the people up on the mountain. Rather than watching all of the cable cars pass you by, take your seat and join the party!

6. Unit bias

The phenomenon of unit bias is very real and powerful. It must be dealt with early on for anyone seriously interested in investing in the stock market—we all must learn that just because the share price of an equity is higher than that of another, it doesn’t make one “cheap” and the other “expensive.”

If a company worth $5 billion is split into a million shares, then each share would be $5,000. If the same company is instead divided into a billion shares, then each share is would be $5. This says nothing about whether the company is overvalued or undervalued at a market capitalization of $5 billion, nor does it say anything about how difficult it would be for the share price to move around. It wouldn’t be any easier for the $5 shares to increase to $10, than it is for the $5,000 shares to increase to $10,000.

As people begin investigating cryptocurrency, many fall victim to this simple error. If a bitcoin costs $50,000 while a dogecoin costs $0.10 and a shiba inu token costs $0.00002, someone might be foolishly attracted to the idea of owning thousands or millions of doggy tokens, rather than a fractional unit of the hardest money in existence. Of course, that’s a catastrophic mistake.

There is a supply limit of 21 million bitcoin, and each bitcoin is divisible by 100 million, into the smallest unit called a “satoshi.” In other words, the system accounts for 2.1 quadrillion satoshis. Technically, what we call “a bitcoin” is a completely arbitrary unit, a social convention started by Satoshi Nakamoto, and not something mentioned at all within the actual bitcoin codebase.

“My choice for the number of coins and distribution schedule was an educated guess. It was a difficult choice, because once the network is going it's locked in and we're stuck with it. I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that's very hard. I ended up picking something in the middle. If Bitcoin remains a small niche, it'll be worth less per unit than existing currencies. If you imagine it being used for some fraction of world commerce, then there's only going to be 21 million coins for the whole world, so it would be worth much more per unit. Values are 64-bit integers with 8 decimal places, so 1 coin is represented internally as 100000000. There's plenty of granularity if typical prices become small. For example, if 0.001 is worth 1 Euro, then it might be easier to change where the decimal point is displayed, so if you had 1 Bitcoin it's now displayed as 1000, and 0.001 is displayed as 1.”
— Satoshi Nakamoto in alleged email correspondence

As Satoshi allegedly points out, how many satoshis make up “a bitcoin” could theoretically be redefined by users, which would behave very similar to a stock split. However, with no central authority over bitcoin, it’s difficult to get social consensus to change anything at all, including terminology. Still, some people are passionate advocates on this topic, pointing out that the masses would much rather be shown a balance of 100,000 satoshis than 0.001 bitcoin, despite those balances being exactly equivalent.

7. Playing catch-up

Everyone wishes they took bitcoin seriously earlier than they did. Once someone first hears about bitcoin, a clock begins ticking, counting every passing day where that person fails to understand bitcoin’s significance. Those days add up to an enormous opportunity cost—dismissing bitcoin for even just a few years can compound into magnitudes of financial punishment. We’ve all seen it, we’ve all lived it.

It might not seem fair. The fact of the matter is, there are certain aspects of reality we can’t change, which are brutal and unforgiving. People can’t go back in time, nor lower the cost of bitcoin. “You get bitcoin at the price you deserve,” some will say, much to the chagrin of later adopters. After all, nobody is entitled to any particular portion of the bitcoin supply. If you dismiss bitcoin for the wrong reasons, you will be faced with the consequences of your irrationality.

How you respond to a mistake is critical, as it can lead to further mistakes. If you have trouble accepting the consequences of your actions, and instead believe you should have more bitcoin than you can now afford, it may invoke a desperation to “catch up to where you should be.” For some, this means using leverage, or trying to trade in and out of bitcoin, timing the tops and bottoms. For others, this means gambling with shitcoins, driven by a delusional expectation that they will outperform bitcoin and ultimately result in owning more bitcoin than simply buying it outright. Obviously, these approaches are playing with fire.

Even worse, once someone’s fantasies of being a bitcoin “whale” become shattered, they might be attracted to the idea of becoming a big fish in a smaller pond. That is, choosing to be a large bagholder of an inferior crypto-token, and then spending time trying convince themself and others that their shitcoin is not actually inferior, but “the real deal,” and “the next bitcoin.” This amounts to becoming the king of a castle of sand, destined to be washed away by the tides of reality.

The best course of action involves humbling yourself

When determining the most logical strategy to deal with a situation, emotions are largely irrelevant. With that said, what is the ideal strategy for an individual within the paradigm of rapid bitcoin adoption? What would it look like to successfully circumvent the seven psychological hurdles covered in this article?

It would mean letting go of many previously held assets, and the habit of managing them. It would mean abandoning any attempt to resist bitcoin via some weaker alternative, and instead joining the winning bandwagon of people who may have previously been your rivals. It would mean coming to terms with your past failures to accumulate bitcoin, and deciding to finally begin accumulating it at a much higher cost. While you might have once had the opportunity to acquire dozens of bitcoin, perhaps now you can only gather up 0.001 bitcoin total. And yet, you’d do it, accepting the reality of your situation and resisting temptations to desperately gamble for more.

This course of action can be quite humbling, but it’s also the most logical one, to save yourself from an even worse outcome down the road. You also wouldn’t be alone—pretty much all bitcoin adopters have gone through this, and you have our support. It can be a painful process, but you’ll find that a better world awaits you on the other side.

It’s quite simple to reap the rewards of behaving like a bitcoin maximalist. In the words of Matt Odell, all you need to do is “stay humble and stack sats.” Work hard to accumulate as much bitcoin as possible, keep it secure, avoid shortcuts, and never trade it away for lesser forms of money. The far more difficult part is getting into the mental state which results in this behavior. I hope this article helps some people do this, by recognizing their suboptimal thoughts and altering them.