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Bitcoin broke through $19,888 on December 1, setting a record high. When I was about to take a break in the evening, a friend suddenly asked me: “What do you think of the Bitcoin that is about to exceed $20,000?” The joy and excitement of the friend was beyond words. Similarly, when opening the social networking site, many friends are full of expectations for the $20,000 bitcoin: “There is a little bit, the past is the endless starry sky”, “the $20,000 bitcoin, a new starting point”…
I am very confused about this. As far as the investment itself is concerned, the difference from US$19,888 to US$20,000 is only US$112, which is only a 0.56% increase. This is not exciting. Even if Bitcoin is denominated in Japanese yen and British pounds, reaching 2,089,400 yen (20,000 US dollars) and 14,893.1417 British pounds (20,000 US dollars), everyone will not be so excited.
So, why are people not keen on the historical high price of 19,888 US dollars itself, but more interested in the fact that it has not reached US$20,000? Or why people are not interested in 19,999 US dollars or 20,001 US dollars, but enthusiastic about 20,000 US dollars?
Is it because investors in the encrypted digital currency market are all “virgos” and have a tendency to perfectionism, which leads to a price of 20,000? Obviously not. Of course, based on the analysis of investor behavior theory, we will find that this is a phenomenon based on mantissa prices.
So, what is the mantissa price? In fact, these types of prices are very common in daily life. For example, in supermarkets, we often see goods with a price tag of 19.8 yuan and 99.9 yuan instead of 20 yuan and 100 yuan. Prices such as 19.8 yuan and 99.9 yuan are generally called mantissa prices, while 20 yuan and 100 yuan are called round prices.
Some modern economic studies have found that fractional prices and integer prices have an impact on investors’ price perception. For example, in the supermarket shopping mentioned above, people are willing to buy more goods with a price tag of RMB 19,9 compared to the price tag of RMB 20. Similarly, although there is not much difference between the $19,888 or $20,100 bitcoin and the $20,000 bitcoin, people prefer to view the $20,000 bitcoin as a landmark. From the perspective of behavioral economics, there are two main factors that cause this kind of phenomenon: one is the level effect, and the other is the image effect.
(1) Horizontal effect
The level effect is also called the underestimation effect. Because people have a potential preference for price perception and processing price information, people will underestimate the price level. There are currently three main explanations for the cause of the mantissa price level effect:
The first is that people usually “round off” the mantissa price. For example, for the Bitcoin of $19,888, people usually round it down and treat it as “$19,000” or “more than $19,000”. At this time, Bitcoin, which is considered “$19,000”, is much less attractive than Bitcoin, which is $20,000.
Secondly, people usually “compare prices from left to right.” Based on daily life habits, people usually observe and compare commodity price numbers from left to right, causing people to ignore the rightmost number of prices and underestimate prices. This method of processing price numbers is not for high-precision recognition of prices, but for the convenience of recognition of prices. For example, when we look at the price of “US$19,888”, looking from left to right, we mainly value the two numbers on the left of 1, 9, while 888 habitually ignores “cut off”. Similarly, for US$20,000, we usually value 2, 0 these two numbers, not 000. In this way, the “20XXX” dollar bitcoin is obviously more attractive than the “19XXX” dollar bitcoin.
Finally, people’s memory is limited. For ordinary people, we don’t remember specific price information at all. For example, for US$19,776, US$19,658, US$20,132, etc., we usually don’t remember it so carefully. In terms of price perception, it is “19,000” and “20,000”, and we only tend to remember the first number of the price. . So at the cognitive level, people think that “19,888” is much lower than “20,000”.
(2) Image effect
Another factor that causes people to prefer “$20,000” is the image effect. Unlike the horizontal effect, the image effect is to show consumers what the numbers represent through the rightmost number of the price. Among them, the image effect is divided into price image effect and quality image effect.
The first is the price image effect. The tail price will make investors have different attitudes towards the future rise and fall of assets. For example, for a bitcoin of $19,888, people who see a mantissa of “888” tend to believe that the market still has upward momentum; similarly, for a bitcoin of $20,100, people see a mantissa of “100”. The perception is basically that it “has risen up.” It can be seen from the above that prices such as “19888” and “19988” will obviously make investors more optimistic and believe that a price of $20,000 is within easy reach.
The second is the quality image effect. Just as in the traditional commodity market, products with fractional prices usually give people the impression of “cheap” and “discount”, while products with integer prices usually give people the impression of “high quality”. In the field of investment, the “20,000” US dollar bitcoin with an integer price gives the market an impression that “bitcoin has entered a new era and a new chapter”. It has a strong symbolic meaning for many investors, so everyone is more Pay attention to bitcoins with an integer price of “20,000” USD, not bitcoins with a mantissa price of “19,888”.
It can be seen from the above that there is no significant difference in investment supervision between the $19,888 bitcoin and the $20,000 bitcoin, but it is different in people’s perception and psychology. Under the influence of the level effect and the image effect, people have more expectations for the “$20,000” integer price of Bitcoin than the “$19,888” mantissa price.