Sats, Bits, and Unit Bias
FirstWatch Crypto was down in Miami for the Bitcoin 2021 Conference, the world's largest Bitcoin conference! Follow our team on Twitter @blaizebitcoin and @DigitalDanMcG to see their takeaways from the world's most prominent crypto voices.
Bitcoin's price is a hot topic. As of this writing, the price of one Bitcoin is equivalent to $38,627.51. That is the current exchange rate from BTC to USD. But did you know that Bitcoin is divisible into smaller units?
The smallest of these units is a Satoshi (SAT), named after Bitcoin founder Satoshi Nakamoto. There are 100 million Satoshis in each Bitcoin.
Bits (uBTC) is another common denomination. There are 1 million Bits in each Bitcoin.
The term "stacking sats" refers to accumulating Bitcoin in small increments. Bitcoin being divisible into satoshis lets investors cost average at values less than one Bitcoin. One of the most common misconceptions about Bitcoin is that an investor must have enough capital for a whole Bitcoin.
What psychological effects does this have for investing?
Unit Bias in Crypto
Here's an example: instead of owning one gold bar, you decide to buy a gold necklace. It's smaller than the bar, but still has value in proportion to the price of gold.
Just like gold, less than one Bitcoin still has immense value, but the effects of unit bias trick us. It feels better to buy a whole than a fraction.
The now-famous Dogecoin is currently priced at $0.403. This leads investors to buy and hold thousands of this low-priced coin simply because thousands of units of DOGE feels better than fractional units of BTC.
The crypto unit bias is a psychological flaw perpetuated by seeing the price of a full Bitcoin. How would things be different in things were priced in Sats or Bits? Bitcoin and other altcoins have intrinsic value, but don't let unit bias lead you astray.
And then start stacking.
Some key s(t)ats:
There are 237,274 Satoshis per person available in the world. A number that consistently falls as populations grow.
$1 = 2,610 Satoshis
Current fees for sending Bitcoin via the lightning network [currently are as low as a couple Satoshis](https://www.bitcoinsuisse.com/fundamentals/what-is-bitcoins-lightning-network#:~:text=While Bitcoin transactions currently cost,0.00000001 BTC%2C or one Satoshi.). This allows you to send currency anywhere in the world for almost no fee.
Resources:
Crypto unit bias explained in a simple way.
The ongoing BTC marketing debate: which denomination to use?
Investopedia: What is a Satoshi?
Lightning Network: What is it?
FirstWatch Crypto
What We Do
Every ship needs people keeping watch. The tireless observers constantly on duty and essential to the ship's safety. FirstWatch Crypto is inspired by this constant vigilance. We are braving the waters together, helping guide your investments through the complex sea of change of cryptocurrencies. These financial technologies have changed the tides of finance, and are leading us to a new world. FirstWatch Crypto brings knowledge and passion for the future of finance and cryptocurrencies. We want to help you achieve a better future by making crypto understandable and accessible for you. We will keep the first watch.
Who We Are
John "Bitcoin Blaize" Hrabrick (@blaizebitcoin) and Dan McGlinn (@DigitalDanMcG) are graduates of the University of Notre Dame. They are based in Philadelphia and are excited about the possibilities that cryptocurrencies bring and write to get others into crypto financially and philosophically.
Disclaimer: None of the above is investment advice. This blog is published for entertainment and informational purposes only. The ideas expressed are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. Nothing on this blog constitutes investment advice, performance data, or any recommendation that any security, portfolio of securities, investment product, transaction, or investment strategy is suitable for any specific person. You should not use this blog to make financial decisions. We highly recommended you seek professional advice from someone who is authorized to provide investment advice. You should always do your own research before investing in cryptocurrencies. It is a volatile market.