Through the psychologist’s eye

Michael Eisink has been a psychologist and coach for 20 years. In 2017 he discovered the wonderful world of crypto and since then he has been infected with the crypto fever. In his columns, he looks at crypto through the eyes of a psychologist.


In the current bear market, as in previous cycles, we are seeing a decrease in focus on Bitcoin (BTC) and other cryptocurrencies. In recent months, we have seen the well-known meme appear on social media where there is a queue in front of the counter where bitcoin is sold for $60,000 and no one is standing in front of the counter where bitcoin is traded at the current price. That makes the editors think. You would think that buying bitcoin at this reduced price would be attractive, right? This may be true for the seasoned Bitcoin maximalist, but certainly not for the average fellow. What psychological mechanism is at play here and how does it work?

The familiar bitcoin meme that is now popping up everywhere

Bitcoin is a familiar term to many people. A minority of the Dutch still do not know enough about crypto to make informed buying or selling decisions. As a result, the majority fall victim to classic principles of psychology, including cognitive dissonance.

Bitcoin and cognitive dissonance?

In 1957, the social psychologist Leon Festinger came up with a theory that explains why people stubbornly cling to an idea they passionately believe in, even if this idea may later prove to be wrong. Festinger argued that people do not like to change their beliefs because it creates an inconsistency; one must then admit that they have put a lot of effort into an invalid theory. This produces cognitive dissonance, a difference in psychological tension before and after refuting the theory (dissonant = deviant). Such a feeling of slight loss of face that people do not like to experience.

An example: suppose you like a certain car model. However, you are in doubt about a red or a yellow. Both colors are equally beautiful and feel equally good. You decide to flip a coin. It will be a red car. It immediately feels like the right choice. You don’t understand why you ever considered a yellow car. It’s all red.

Cognitive dissonance in crypto

We all know the feeling. During the heyday of the Bitcoin cycle, birthdays are about how much bitcoin has who and to what level the price will moon. Doubters hang on every word at that moment and look at you admiringly. Most of them also want to buy bitcoin but dare not. Some actually end up buying bitcoin through trading platforms like Bitvavo, and some don’t.

The group that invests in bitcoin (or other crypto) exposes itself to a risk. It creates an uncomfortable tension. This will be removed through the principle of cognitive dissonance. “Bitcoin is here to stay!” even during and after a trend reversal, this group will tend to continue to believe in Bitcoin’s future. In fact, the greater their losses, the greater their confidence in Bitcoin (at least for quite a few in this group and in the short to medium term).

The group of people who do not invest in bitcoin also expose themselves to a risk. As bitcoin rises, excitement rises. “If only I had…”. This bad feeling is also explained away: the higher the prices, the more people believe that bitcoin is a bubble that will eventually burst.

A bear market always follows a bull market. Non-Bitcoin buyers will say, “Good thing I didn’t buy it anyway. You see Bitcoin is a big hype and Bitcoin is a pyramid scheme!”

In the above way, the bitcoin owners and non-bitcoin owners will always stubbornly hold on to their opinion so as not to let their psychological tension rise too much.

“Bitcoin at $15,000”

Here comes the topic of the previous column, about staying in control in a bear market, along with the topic of the current column. When the bitcoin price drops sharply, it usually causes too much excitement. For some people, the tension becomes too great to explain away using the above theory. They will fall victim to the mechanism of Fear, uncertainty and doubt (FUD) and based on it panic sell. They will have to accept that loss. This hurts, causes feelings of depression and shame. This is explained away by cracking down on Bitcoin. It was stupid for them to invest in it, they say. They will be inclined to argue with Bitcoin positives and will do so with fire.

Doubters will move more towards not buying as more negative stories appear in the media. “Bitcoin breaks this time, never recovers,” you know.

Only a very small fraction of Bitcoin investors can handle the excitement that Bitcoin ownership brings. They are the group of HODLers and will hold on to everything they have in them. They do not act on emotion and will continue to buy because they see that it is probably a good opportunity to hoard cheap bitcoin. This is the handful of people standing in front of the booth with the sign “Bitcoin for $15,000.”

Think like a HODLer

Remember that there are many psychological factors involved in owning and trading stocks, including bitcoin and other crypto. This is called stock market sentiment. Even if you think this is not the case with you, it is. Be aware that the principle touched upon today affects your decisions and take advantage of it! Dare to think like a HODLer. There are risks, but also great opportunities, especially during a bear market.

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