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The Science Behind Cryptocurrency Misconceptions: Confirmation Bias
2024-12-27
Key points
Confirmation bias causes us to seek out information that reinforces our pre-existing beliefs, often ignoring evidence that contradicts them.
This bias greatly reinforces false beliefs associated with everyday life and cryptocurrencies, ranging from “the moon landing was faked” to “cryptocurrencies are only used for illegal activities.”
Other biases work in tandem with confirmation bias, creating a vicious cycle that distorts our perception of facts.
Have you ever wondered why it’s so hard to change someone’s mind, even when the facts are right in front of them? It’s often because of confirmation bias, a cognitive mechanism that causes us to seek out and believe information that aligns with our pre-existing views. Whether it’s historical myths or misconceptions about cryptocurrencies, confirmation bias plays a powerful role in shaping how we select and process information.
In the conclusion of this series, we'll uncover the science behind confirmation bias and explore how it fuels some of the most persistent myths about cryptocurrencies.
confirmation bias
Why do we cling to false beliefs, even when faced with evidence that dispels them? Confirmation bias is often to blame. Defined by the Encyclopedia Britannica as the “tendency to process information by seeking out information that agrees with or explains existing beliefs,” confirmation bias misleads us by filtering reality through the lens of convenience.
This means that we give more weight to what we already believe and ignore anything that challenges those beliefs. This mental habit becomes especially powerful when we are emotionally invested in an issue—making it difficult to see the big picture, even when it’s right in front of us. We humans generally enjoy the comfort of having a consistent, unambiguous picture of the world. In today’s environment of contradictory and fragmented online information, this deep-rooted bias is activated to maintain that worldview consistency in the face of constant change.
Myths That Will Never Die: How Confirmation Bias Keeps Fallacies Alive
No achievement, not even the moon landing, is immune to the distortions of confirmation bias.
Despite the overwhelming photographic and video evidence, as well as the testimony of astronauts and scientists, the moon landing conspiracy theory persists. Believers cling to selective “evidence” that confirms their suspicions while dismissing overwhelming evidence to the contrary. They discount anything that doesn’t fit their preconceived narrative. This phenomenon shows how even well-documented historical events can be dismissed as lies when people allow their preconceptions to guide their interpretation of the facts.
Another common misconception that forms as a result of confirmation bias is the belief that people are capable of multitasking effectively.
Despite extensive scientific research showing that the human brain struggles to focus on multiple tasks at once, many people still believe they can handle multiple tasks at once without a drop in performance. Studies show that multitasking leads to more errors and lowers productivity, but people often focus on the rare instances where they believe they successfully multitask. Confirmation bias reinforces this belief, leading people to ignore evidence that concentration and efficiency suffer when they try to juggle multiple tasks at once.
A playground for criminals and another bubble?
Now let’s turn our attention to the world of cryptocurrencies. If you’ve ever heard someone say that cryptocurrencies are only used for illegal activities, you’ve come across a myth deeply rooted in confirmation bias. This idea gained traction early in the history of cryptocurrencies, when high-profile cases of drug trafficking and money laundering dominated the headlines. While these stories are true, they represent a tiny fraction of the actual transactions that occur on blockchain networks.
The problem? People are more likely to remember negative news that aligns with their beliefs. Once they make a mental association between cryptocurrencies and crime, confirmation bias ensures that they continue to filter out positive developments — such as the fact that less than 1% of cryptocurrency transactions are linked to illegal activity.
The idea that cryptocurrencies are a bubble is another myth that has been amplified by confirmation bias. We see this every time there is market volatility – skeptics seize the opportunity to claim that cryptocurrencies are doomed. But as with traditional markets, price fluctuations are part of the game, and do not necessarily indicate that the entire asset class is about to collapse.
What confirmation bias does here is amplify our focus on short-term fluctuations while ignoring the broader, longer-term innovations occurring within the crypto space — such as ever-evolving technologies or the increasing adoption of blockchain technology across industries. This selective focus can lead to skewed perceptions and persistent misconceptions.
full circle, full circus
Furthermore, confirmation bias does not operate in isolation; rather, it works in conjunction with many other cognitive biases to reinforce misconceptions. Here’s how these interactions might unfold, step by step:
First, the anchoring effect may set the stage by providing an initial piece of information—say, the idea that cryptocurrencies are only used for illegal activities. This first impression sticks in the mind and becomes the basis for how a person processes everything related to cryptocurrencies.
Next, confirmation bias may kick in. Once an anchor is established, it encourages one to seek out information that aligns with their initial belief — focusing on news stories or articles that emphasize the negative aspects of cryptocurrencies, while ignoring or downplaying any information that contradicts these views.
Next, the imitation effect can reinforce your belief. As more people around you — whether through social media, news, or conversation — echo similar negative sentiments about cryptocurrencies, they may be more inclined to adopt those views as well, believing that “everyone else” shares a certain belief, so it must be true.
As the narrative grows, the illusory truth effect may take hold. The more you hear the same ideas about cryptocurrencies, the more they begin to feel true, regardless of the accuracy of the information. Repetition makes the myth seem more believable.
Next, availability bias may hold them back. When negative stories about cryptocurrencies dominate the news, they are more easily remembered, overshadowing any balanced or positive stories one might come across. These vivid examples of fear stick in one’s mind, reinforcing your existing beliefs.
In the future, status quo bias could play a crucial role in fostering distrust. People generally feel safer in familiar financial systems, and traditional financial systems—such as banks and fiat currencies—have long been viewed as stable and trustworthy. Because cryptocurrencies are a relatively new and volatile asset class, they seem unfamiliar and untested to many. This preference for the status quo means that even when presented with facts about the potential of cryptocurrencies, individuals may simply reject them because they don’t fit within their comfort zone or what they know.
Finally, this endowment effect can foster distrust. When people have invested long-term in traditional financial systems, whether through time, energy, or wealth, they tend to overvalue those systems simply because they are special to them. For example, someone who has spent years building wealth with fiat currencies or investing in stocks may struggle to see the value of cryptocurrencies, even when presented with compelling evidence. This emotional attachment to the familiar makes it difficult to embrace new financial innovations, even when they are beneficial.
Taken together, these biases—anchoring, confirmation bias, illusory truth, availability, status quo, and endowment—form a powerful feedback loop that polarizes human cognition and shapes unconscious behavior. On a broad scale, these biases encourage us to err on the side of caution—often leading us to favor more conservative, socially acceptable, and popular beliefs. Overall, this inherently makes it difficult for any innovative idea, technology, or approach to gain widespread acceptance, because these biases reinforce the comfort of familiarity and the safety of collective consensus.
In the context of cryptocurrencies, this feedback loop perpetuates mistrust, making it increasingly difficult to break free from widespread misconceptions. Each bias reinforces the others, reinforcing initial beliefs over time in a cyclical manner, creating a barrier to more balanced or informed views taking hold.
Liberation: How to Overcome Confirmation Bias
Breaking free from confirmation bias isn’t just a small step—it may be the key to dismantling the web of flawed thinking. By challenging your own beliefs, you open the door to new perspectives and weaken the grip of the anchoring effect. This makes you less likely to join the crowd, reduces the knee-jerk effect, helps you spot recurring myths for what they are, and resists the influence of illusory truth. With availability bias losing its grip, you see situations more clearly and make better, more informed decisions. Furthermore, by actively questioning the familiar and stepping outside the comfort zone of ingrained beliefs, you can overcome status quo bias, opening your mind to new possibilities. Likewise, by recognizing the endowment effect, you can separate the emotional value from old ideas and begin to embrace more practical, evidence-based perspectives. Breaking free from confirmation bias is thus the first domino that can topple the entire chain of biases.
So how can we combat confirmation bias? We need to actively seek out information that contradicts our assumptions! By broadening our media intake, stepping out of echo chambers, and paying attention to contradictory evidence, we can begin to build a more complete picture.
Final Thoughts
Confirmation bias clouds our judgment, causing us to cling to false beliefs and misconceptions, whether in history or finance. When it comes to cryptocurrency, this bias plays a crucial role in perpetuating myths. However, once you recognize the power of confirmation bias, you can begin to question the assumptions that hold us back. By adopting a mindset that actively seeks out diverse perspectives and challenges our preconceptions, we can break free from this mental shortcut — and make more informed decisions about the world of crypto and beyond.
So the next time you hear a story that aligns perfectly with your beliefs, ask yourself: Am I really seeing the whole picture? The answer may surprise you. This is where Binance Academy shines. Our open access hub provides valuable insights to help you identify and overcome biases like confirmation bias. As we wrap up our “The Science Behind Cryptocurrency Misconceptions” series, check out previous entries to better understand how other biases shape popular crypto myths. Stay informed, challenge your assumptions, and dive deeper into blockchain education with Binance Academy!
Further reading
Ghosts of Cryptocurrency Past: Dispelling Myths About Bad Actors and Lack of Security
The Long Game of Cryptocurrencies: Understanding Market Cycles
From Joke to Global Phenomenon: What's Becoming So Popular?