Market Thoughts

How “Unit Bias” Can Make You Rich in Crypto

One of my most successful strategies in the last bull market was simply buying the cheapest coins on binance.US and waiting for all the newbies to show up.

I made an offensive amount of money with that simple trading thesis.

But why was it so effective?… Unit bias.

If you aren’t aware of what that term means, unit bias is a logical fallacy that many novices fall for.

It’s the belief that owning more coins is better, irrespective of any other factors. 

They simply can’t grasp that if you put $1000 into a token, and then it runs for a 100% gain, it doesn’t matter how many tokens you have. A 100% gain is still a 100% gain.

That initial $1000 dollars is still going to be $2000 after running for 100%, whether you have 1 token or 40 billion.

In their minds though, more tokens means more money down the line.

People also get these “pie in the sky” dreams when they see they can buy 35 million tokens of some trash coin for $200, and they think to themselves, 

            “What if it goes to $1!? Bitcoin is worth tens of thousands, this can surely hit $1!”

Except that coin they just bought already has a market cap of $30 million, and is printing a ridiculous number of new coins every day.

Now, it’s completely different if you find a project early and buy millions of tokens when the market cap is $200k. 

That’s a wildly different story, which is why it’s so important to grasp the concept of market caps.

So, how can you profit from this?

I’m operating under the thesis that human nature won’t have changed much in the last few years, which I feel it’s a pretty safe bet.

I think unit bias will be just as big of a factor in this bull run as it was in the last.

The strategy is to get positioned in these “cheaper” coins at the very start of the bull run, and then dump them on the newbs.

It’s not too difficult to ride multiple 3-10x moves just playing coins on centralized exchanges. 

Once “up only” season returns, and you start seeing mainstream outlets talking about crypto prices going up again, the unskilled masses will be back to try to strike it rich in the digital gold rush.

And once again, they’ll be looking to buy whatever coins will give them the most tokens for their wagie bucks.

All you have to do is get positioned before they really start moving, and then flip the position after multiple X’s. 

That’s what I’ll be doing, anyway. 

Until next time, 

Fractal

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