At the New York Times, Paul Krugman used the roller coaster weekend as an occasion to once again call Why should i use bitcoin a long con. But among the Bitcoin faithful, the sun never stopped shining.
On Reddit’s Bitcoin discussion board, for example, home to almost 140,000 enthusiasts of the electronic currency, the price drop was framed as good news. The good old days are back! Who else is enjoying the firesale? How to explain the eternal optimism? Is it possible that Bitcoin’s most dedicated fans are simply more tuned in to the currency’s long-term potential than the broader market and therefore have a more favorable view of its true value?
Sure, it’s possible — but Meir Statman, a professor at Santa Clara University specializing in behavioral finance, has a more plausible explanation for the findings: Confirmation bias. In short, he says, Bitcoin communities tend to be echo chambers of optimism, giving their members a false impression of the currency’s true value. This explanation would seem to be supported by a recent study of Bitcoin users by researchers at the University of Illinois, who found that those who participated in online Bitcoin communities were far more bullish about the currency’s future price than other Bitcoin holders. Of course, that’s not a phenomenon unique to Bitcoin or online forums. If you are not careful, all you hear is that people are making tons of money.