A low-priced coin can make investors feel a little richer when they first start buying crypto with a relatively small amount of money. For example, $100 will buy 0.0016 of a single Bitcoin or 1.574 million Shiba Inu (SHIB).
It’s called unit bias, and it’s a natural tendency and way of thinking about value among novice traders who tend to buy a lot of one kind of cryptocurrency because the price of one unit is relatively small compared with, say Bitcoin.
Shiba Inu has bypassed Dogecoin, the coin it’s parodying, to become the No. 9 coin by market capitalization. Dogecoin (now No. 10) was created in 2013 as a joke in honor of the “Doge” meme of a Shiba Inu dog. Shiba Inu burst on the scene in 2020 as a homage to Dogecoin, a joke on a joke.
“All of this epitomizes just how zany the markets have become amid the pandemic,” wrote Decrypt Editor-in-Chief Daniel Roberts. “It’s purely a retail phenomenon; even as institutional crypto adoption soars, financial firms want nothing to do with the joke.”
Unit bias is one of a slew of biases — sometimes called flaws of human psychology — in crypto trading among retail investors. There are several other forms of bias including cognitive bias, availability and recency bias, anchoring bias and hindsight bias.
In early 2011, the then-obscure cryptocurrency Bitcoin reached $1 per coin for the first time. If you’d bought $100 worth and held them, they’d be worth $6,193,800 today.
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“You could argue about the validity of these ridiculous valuation increases, but you would be missing the point,” Cryptovangelist @xsid wrote for Steemit, a blockchain-based blogging and social media website. “The point is not to stand by and bemoan the flaws of human psychology as traffic passes by – the point is to take advantage of human psychology.”
Unlike Bitcoin, which is designed to be scarce and inflation-resistant, Dogecoin was created to be abundant. There are about 130 billion DOGE circulating. Dogecoin is 63.82 percent below its all-time high of $0.74 and is trading today at $0.027.
Shiba Inu aspires to be an Ethereum-based alternative to Dogecoin and, like Doge, is intentionally abundant, with a total supply of one quadrillion. The price of Shiba Inu is up 36 percent in the past week. The current price of $0.000066 per SHIB is a new all-time high, according to Coinbase.
Tesla CEO Elon Musk is considered the top Dogecoin pumper. His tweets move markets. Reality TV host Mark Cuban insists DOGE is “a real utility because his NBA team takes it as payment.”
Bitcoin and Ether average trade sizes are larger than those of Dogecoin and Shiba Inu on almost every exchange, according to Coindesk. On Coinbase, the average Bitcoin trade size is around $2,000, Ether trades average $1,600, while Dogecoin and Shiba Inu are about $800.
“This suggests price action is mostly retail-driven,” said Clara Medalie, strategic initiatives and research lead at digital asset data provider Kaiko
Cryptovangelist suggests that wannabe new investors “pick a few low circulation, low value coins and give it a try. Take advantage of herd mentality and watch your fortunes grow – if you’re lucky.”
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?