Why Bitcoin is NOT Expensive

Published in

Coinmonks

7 min readMar 27, 2022

There are a lot of people out there who want to get into Bitcoin (BTC), but they think “I can’t afford Bitcoin. It’s too expensive”.

Those people, however, don’t realise that what’s holding them back is not that Bitcoin is expensive, but the unit bias they suffer from.

They look at Bitcoin’s price of $44,200 per coin, at the time of this writing, and they feel discouraged and disheartened.

Then, they look at other cRaPtOs and see that they cost just a few dollars or even a few cents.

This unit bias is what blinds them into believing that Bitcoin is expensive, while cRaPtOs are cheap.

But, obviously, they’re not comparing apples to apples, from the point of view of unit/supply cost, let alone from the point of view of the network effect, network security, etc. of the cryptocurrencies they’re comparing.

In this article, we’ll look at how to better compare Bitcoin to cryptocurrencies that look cheap, from the point of view of unit bias.

Bring out Dogecoin

One of the favourite coins of people suffering from unit bias is Dogecoin (DOGE), which, at the time of this writing, has a price of $0.13 per coin.

Compared to Dogecoin, Bitcoin sounds outrageously expensive, and it’s easy to see why.

But, the way it’s measured, by most people, is wrong, because they judge the price alone, and they don’t take into consideration the supply of the currency.

For example, at the time of this writing, there are 18,994,155 Bitcoin and 132,670,764,300 Dogecoin in circulation.

The Bitcoin supply is capped at 21 million, while the supply of Dogecoin is unlimited and, every year, 5 billion Dogecoin are added to the supply.

That’s a big difference to spot, already.

So, to get a close comparison of how expensive Bitcoin is vs Dogecoin, we have to measure them based on the supply of the other.

Why? Because, right now, people look at the massive price difference between $44,200 per BTC and $0.13 per DOGE―or BTC vs “insert name of cheap-looking cRaPtO”―which makes BTC look 340,000 times more expensive than DOGE.

To get a better understanding of how much more expensive BTC is vs DOGE, we need to run the following calculations:

18,994,155 (supply of BTC) X $44,200 (price per BTC) = $839,541,651,000 Bitcoin market cap

132,670,764,300 (supply of DOGE) X $0.13 (price per DOGE) = $17,247,199,359 Dogecoin market cap

$839,541,651,000 (Bitcoin market cap) ÷ 132,670,764,300 (supply of DOGE) = $6.33 per DOGE

$17,247,199,359 (Dogecoin market cap) ÷ 18,994,155 (supply of BTC) = $908.02 per BTC

Based on these calculations, we can see that, when measuring the price of BTC by the supply of DOGE, the price of BTC drops from $44,200 per BTC to $908.02, which represents a 97.95% decrease.

Similarly, when measuring the price of DOGE by the supply of Bitcoin, the price of DOGE rises from $0.13 per DOGE to $6.33, which represents a 4,769.23% increase. Wow!

Moreover, now, we can see that BTC is, in fact, 143.44 times more expensive than DOGE, not 340,000 times.

Still more expensive, but there are good reasons why, which I will cover in an upcoming article so, make sure you follow me, to know when that comes out.

So, it’s clear that, when measuring, these 2 cryptocurrencies by each other’s supply, Bitcoin is so much cheaper, while Dogecoin is so much more expensive.

But you’ll say “yeah, but Dogecoin is just a meme coin and was created as a joke! Compare how expensive Bitcoin is with a serious cryptocurrency!”.

Yes, that is true, and I agree with you, but that serves as a very good starting point, considering that many people bought Dogecoin specifically because it looks “cheap”, due to its price per coin, without realising that it’s actually waaay more expensive, when measured properly against Bitcoin.

Next in the ring is Cardano

Let’s do another example, this time, using Cardano (ADA), which is a proof of stake cryptocurrency, that has had a lot of hype behind it, last I checked, because people expect it to have a lot of utility and it, too, looks “cheap” vs Bitcoin.

Below, we’ll do the same calculations that we did earlier, but, this time, for BTC vs ADA.

At the time of this writing, the price of ADA is $1.13 per coin and the supply is 33,726,239,240 out of the max supply of 45 billion.

33,726,239,240 (supply of ADA) X $1.13 per ADA = $38,110,650,341.2 market cap of Cardano

$839,541,651,00 (Bitcoin market cap) ÷ 33,726,239,240 (supply of ADA) = $2.49 per ADA

$38,110,650,341.2 (market cap of Cardano) ÷ 18,994,155 (supply of BTC) = $2,006.44 per BTC

Based on the calculations above, we can see that, when measuring the price of BTC by the supply of ADA, the price per BTC drops from $44,200 to $2,006.44, which represents a 95.46% decrease.

Similarly, when measuring the price of ADA by the supply of BTC, the price per ADA rises from $1.13 to $2.49, which represents a 120.35% increase. Again. Wow!

Again, at first sight, based on the price of $44,200 per BTC and $1.13 per ADA, it appears that BTC is 3,115.04 times more expensive than ADA.

But, as we can see from the calculations we did above, actually, BTC is 805.80 times more expensive than ADA, not 3,115.04 times.

And you can do this exercise with all the cRaPtOs out there that look “cheap”, when compared to Bitcoin.

The truth of the matter is, they just look cheap, because of unit bias, which means that people prefer to buy whole units of a thing than buying fractions of it.

To be even clearer, it means that people, who suffer from unit bias, are more inclined to:

- buy 1,000 DOGE than buying 0.00294117 BTC (294,117 sats), which, at the current prices of both BTC and DOGE, would cost $130.

- or buy 100 ADA than buying 0.00255656 BTC (255,656 sats), which, at the current prices of both BTC and ADA, would cost $113.

This unit bias, I believe, is also influenced by the fiat mentality, in which people conflate having more units of currency in the bank account as having more purchasing power.

This is true, but to a certain extent, because, often, they leave out the massive devaluation of the currency, to begin with.

So, for example, let’s say you earn $100K per year and you just got a 5% raise. Yaay! Well done to you!

Now, you’re earning $105K per year and you feel richer, because you’ll end up with more units of currency in your bank account.

But, now, the reported inflation is 7.9% and, despite your 5% raise, your $105K will buy you 2.9% less products, services, and assets, because of inflation, a.k.a. devaluation of the currency or drop in purchasing power of the currency.

Now, that’s based only on the reported inflation rate, which is way off from the real inflation rate you will experience, when you go to pay for products, services, and assets.

To paraphrase Michael Saylor, inflation is a vector, which means that you’ll experience a different rate of inflation than other people, because of the difference in the things you want to buy.

If you live in your parents’ basement, playing video games, watching Netflix, eating Domino’s Pizza, and smoking weed, the inflation rate you’ll experience is very different to someone who has a family of 3, pays rent for their home, pays for food & utilities, pays for childcare, pays for life insurance, drives to a job, and is planning to buy a house.

The other person will get hammered by the rising cost of rents, food & energy, childcare, healthcare, fuel, and real estate.

Based on latest figures, that person is looking at an inflation rate of at least 25%, which means that they could’ve gotten a 20% raise from last year, and still be able to afford less, because of inflation.

So, focusing on having more units of fiat doesn’t mean you’ll have an increased purchasing power, necessarily, because the whole thing is more nuanced than “Oh! I got a raise! I’m making more money now.”

That’s all nice and cool, but, if your purchasing power has dropped more, as a percentage, than the raise you got, as a percentage, then it’s not the win you think it is.

Yes, a raise, in an inflationary environment like this one, is better than no raise, that’s definitely true, but you need to see the bigger picture, is what I mean.

So, to wrap things up, I hope you now have a better understanding of how you can measure how “cheap” a cRaPtO is, when you compare it to Bitcoin.

There’s more to this, of course, but I will cover that, in a later article so, make sure you follow me, to be notified of when it comes out, because I’m sure you’ll get value from that one too.

If you enjoyed this one and got value from it, make sure to share it with friends and family who might also suffer from unit bias, when comparing Bitcoin to cRaPtOs.

Also, leave me a comment below with your feedback and any counterarguments that you have.

Constructive criticism is great to receive, because it’ll allow me to become a better writer and put out better content for you.

Thanks for reading 🧡

Join Coinmonks Telegram Channel and Youtube Channel learn about crypto trading and investing

Why Bitcoin is NOT Expensive

Also, Read

Written by Marius Ciubotariu