Here’s A Look At The Bitcoin Price From A Bias Theory Angle

The bitcoin price has spent the last few months rocketing to current levels and this has brought with it a host of different layers of expectation. Some believe price will continue to rise. Some believe that the current run is nothing but an asset bubble and that- inevitably, as bubbles do – we’re going to see things pop near term.

Interestingly, and perhaps not surprisingly, the two categories are roughly approximate to the amount of bitcoin each holds. That is, those without any significant bitcoin holdings expect that the price of bitcoin will fall near term, while those who hold a certain amount of bitcoin are pushing forward expectations that price will continue to rise long term and that – in turn – their holdings will continue to appreciate in value.

This is an example of an expectation bias, where the reality (as relates to the person forming the expectations) weighs towards what benefits them, as opposed to being objective.

In line with this argument, both are true, assuming that there is an equal number of participants on both sides of the fence. In this instance, however, that’s not the case. The number of people betting (well, not betting, but not holding based on bubble expectations) against bitcoin in the world vastly outweighs the number that hold in anticipation of further advance.

This suggests, in theory at least, that there’s more credence to the suggestion that bitcoin is going to rise, if we use the median point between the two sides of weighted expectations.

Of course, this could all be nonsense. Theoretical exercises like this often prove to be nothing more than exactly that – theory – and, in reality, play out far different from how the formulas suggest they might.

With that said, however, there’s no reason not to take a look at price from every which angle and this is just one more interesting approach to trying to figure out what’s going on in this crazy space we call bitcoin.

Let’s see how things play out going forward.

These are interesting times, that’s for sure.

As things stand, price currently trades for 6813, down on the 7000 recorded earlier this week.

Bitcoin image courtesy of Flickr