Bitcoin (BTC), the first and most well-known cryptocurrency, has been facing criticism again. Some people are calling it a scam because its price has been struggling to rise back to higher levels it last reached in November.
However, a crypto expert named Shanaka Anslem Perera shared a different explanation. He believes this reaction is not just about money, but more about psychology and emotions. He linked the idea of panic selling in Bitcoin to something called prospect theory.
What is Prospect Theory?
Prospect theory is a concept from behavioral economics. It was created by Daniel Kahneman and Amos Tversky, two famous psychologists, and they won a Nobel Prize for their work in 2002. This theory explains how people feel about gains and losses. According to it, losing money feels about twice as bad as gaining money feels good. In simple terms, the pain of losing $100 is more intense than the joy of earning $100.
Perera said, when the price of Bitcoin drops a lot, for example by 30% or 40%, people feel strong emotional pain. To explain this pain, many start calling Bitcoin a scam because it feels like a simple answer to their frustration. He said: “You need an explanation that matches how bad the loss feels, and saying ‘scam’ fits perfectly.”
What Happens When People Panic Sell?
Perera pointed out that around 70% of small investors who buy Bitcoin during price increases end up selling it at a loss within a year. He also explained that those who hold on to Bitcoin for four years or more rarely lose money. This shows that patience can be rewarding in the long term. He said every time someone calls Bitcoin a scam, it’s like proof of wealth being transferred from impatient sellers to patient holders.
Bitcoin’s Volatility Over Time
Bitcoin is known for its price swings (called volatility). But Perera said these big price changes have become smaller over the years. For example, in 2011, Bitcoin’s price dropped by over 90% during a crash. Now, the drops are closer to 50–60%. This shows that Bitcoin is slowly becoming more stable as it matures.
Why Do Some Call Bitcoin a Scam?
The idea that Bitcoin is a scam has gained more attention recently. Bitcoin has been stuck in what is called an “extreme fear” phase. This means many people are still very hesitant and negative about it. Some critics, like economist Steve Hanke, argue that Bitcoin has no real value. Hanke believes the recent price drop proves Bitcoin is a failing system.
How is Bitcoin Performing?
Currently, Bitcoin’s price is much lower than its all-time high. It recently dropped to about $85,000 but then bounced back a bit to around $87,000. Despite this, Bitcoin’s performance over the past year has been disappointing compared to other investments. For example, Bitcoin gave a return of -15% in one year, while gold returned +65%, and the S&P 500 index returned +14%.
However, over the long term, Bitcoin has outshined these traditional investments. Over the past three years, Bitcoin’s return was +422%, while gold gave +141%, and the S&P 500 gave +49%. Since Bitcoin was created in 2008, its total return is over 2 million%, while gold and the stock market have grown by much smaller amounts.
Lessons for Investors
Perera and other experts suggest that surviving Bitcoin’s ups and downs requires patience. Instead of rushing for quick profits, investors should focus on slowly building their investments over time. Reflecting on the preferences for fast gains, Perera says, “Humans naturally chase quick profits, but success comes from staying steady over a longer period.”
The Ongoing Debate
The debate over Bitcoin’s value is still alive. On one hand, some investors believe in its future because of things like institutional adoption (big companies using it) and its basic strengths, like being decentralized. On the other hand, critics remain skeptical, often pointing to its high volatility and claim that it has no real value.
For now, Bitcoin remains a highly debated asset, rewarding patience and long-term belief while testing anyone looking for quick riches.