Bitcoin Through a Clinical Reasoning Lens: Differential Diagnoses and Cognitive Biases

Introduction

In medicine, doctors use clinical reasoning to interpret objective data and reported symptoms to arrive at a diagnosis. The final diagnosis is often mediated through the process of forming a differential diagnosis, which is a shortlist of possible explanations, before settling on the most likely condition. In a similar spirit, we can analyze Bitcoin as if it were a “patient” presenting as a set of characteristics (signs and symptoms) to determine its true purpose. Is Bitcoin primarily a store of value, a speculative asset, a currency, a decentralized payment network, or an ideological movement? Each of these “diagnoses” has supporting evidence in real-world data from market behavior and adoption trends to institutional interest and regulatory attitudes. By examining these facets systematically, we can form an understanding of what Bitcoin represents in 2025.

A pervasive challenge to clinical reasoning skills is recognizing cognitive biases that cloud judgment in medicine. Doctors must be wary of pitfalls like premature closure or anchoring that can lead to misdiagnoses. Likewise, public, institutional, and regulatory perceptions of Bitcoin can be skewed by biases such as jumping to conclusions (e.g. “Bitcoin is just a bubble”), clinging to first impressions, or seeking only information that confirms existing beliefs. In this report, we first conduct a differential diagnosis of Bitcoin’s role, then explore how common cognitive biases manifest in the discourse around Bitcoin. The goal is a balanced, diagnostic-style evaluation of Bitcoin’s evolving role, accompanied by an examination of how biases have influenced its narrative.

Differential Diagnosis of Bitcoin’s Purpose

To determine Bitcoin’s “diagnosis” or primary role, we consider several leading interpretations analogous to competing diagnoses. Each interpretation comes with its own set of supporting signs and symptoms drawn from market data, user behavior, institutional involvement, and regulatory frameworks. 

Bitcoin’s identity is multifaceted and depends on an individual’s background, demographic, and baseline knowledge of Bitcoin. The interpretations are not mutually exclusive. Bitcoin can be (and in practice is) more than one thing at once. Indeed, its evolution has seen narrative shifts over time. In Bitcoin’s early years, many viewed it as a novel e-cash for online payments, or conversely, dismissed as a tool for criminals (the “Dark Side” narrative). Around the mid-2010s, stories of its volatile price and “tulip-mania”-like speculation took center stage. By late 2010s, after surviving several boom-bust cycles, the dominant narrative had shifted toward Bitcoin as “digital gold,” a scarce store of value and investment asset. This narrative gained even more momentum into the 2020s with institutional investors entering the space and public companies and ETFs accumulating Bitcoin, legitimizing that role. At the same time, technical developments like the Lightning Network have quietly reinforced Bitcoin’s parallel role as a payment network. Through it all, the ideological and cultural movement surrounding Bitcoin, with its memes, evangelists, and critics, continues to influence its trajectory, as well.

Below, we work through our differential diagnoses for Bitcoin, examining the evidence in detail and noting where the analogy to a given role is strongest.

Bitcoin as a Store of Value (“Digital Gold”)

One popular view is that Bitcoin functions as a store of value, akin to a digital form of gold. Proponents of this narrative point to several defining features of Bitcoin that mirror attributes of traditional value stores like gold: scarcity, durability, and fungibility. Bitcoin’s supply is algorithmically capped at 21 million coins, enforcing its scarcity and resistance to debasement (no central authority can “print” more bitcoins). This fixed supply, combined with a growing user base, creates an expectation of long-term value appreciation, especially considering fiat currencies experience inflation by design. Fidelity Digital Assets, for example, notes that Bitcoin’s fixed supply drives demand from investors looking to protect purchasing power, underscoring its potential as a store of value. The idea is that Bitcoin’s monetary hardness (provable limited supply) could make it a hedge against inflation or currency depreciation, a role traditionally played by gold.

Despite periodic significant drawdowns in price, Bitcoin’s long-term price trend has been strongly upward since its inception, outpacing virtually every other asset class over the past decade. Its market capitalization, surpassing $2 trillion, makes it the fourth largest company in the world. Evidence of its store-of-value behavior is seen in on-chain data: a significant portion of bitcoins (well above 60% in some analyses) have not moved in over a year, indicating many holders treat it as a long-term savings asset rather than a medium of exchange. Moreover, Bitcoin has shown correlation with macroeconomic factors like liquidity and inflation expectations, behaving at times like a “macro asset.” Fidelity’s research found that over the past decade, Bitcoin had a positive correlation with CPI (inflation) and reacted to global money supply changes. This suggests investors are indeed using it, to some extent, as a hedge or store of value in response to macroeconomic trends.

Institutional interest further bolsters the store-of-value narrative. In the past few years, investors ranging from hedge funds and family offices to corporate treasuries have started allocating to Bitcoin with the explicit rationale of it being a long-term store of value. A notable example is MicroStrategy, a publicly traded company that converted a large portion of its cash reserves into Bitcoin as a treasury reserve asset, explicitly comparing Bitcoin to gold in its rationale. There are now over 200 public and private companies that hold bitcoin on their balance sheets.

In 2024, several major investment firms, including BlackRock and Fidelity, advanced proposals for spot Bitcoin ETFs, framing Bitcoin as a legitimate asset class for diversified portfolios. The approval of a Bitcoin ETF in late 2024 signaled a milestone: it “further solidified [Bitcoin’s] status as ‘digital gold’” in the eyes of the market. Research by traditional financial institutions (J.P. Morgan, Bloomberg, etc.) has argued that a small Bitcoin allocation can improve portfolio performance, likening it to commodities or gold as a store-of-value asset.

Despite these positive signs, there are also symptoms against the store-of-value diagnosis. Critics highlight Bitcoin’s ongoing volatility as a major impediment to being a stable store of value. An asset that can lose 50% of its value in a few months (as Bitcoin did in early 2022, or in past cycles) does not inspire the same confidence as gold or stable fiat for wealth preservation. A 2025 analysis noted that Bitcoin’s historical performance “does not support the store of value claim” because of its extreme price swings. The argument is that only once adoption is far more widespread, leading to much larger market cap and thus likely lower volatility, could Bitcoin truly function as a stable store of value. Additionally, it is argued that unlike gold, Bitcoin currently lacks significant non-investment use cases (gold is used in jewelry, industry, etc., which underpins some base demand). If investors lose confidence in Bitcoin’s store-of-value thesis, there is no underlying consumption demand to catch the price, a point often raised by skeptics. Regulators and central bankers frequently underscore that Bitcoin has no intrinsic value and is sustained largely by belief, warning that this makes it vulnerable as a store of value. For instance, a World Bank blog in 2024 argued that crypto-assets’ lack of intrinsic value and reliance on speculative interest “undermine [their] safety… as reliable reserve assets”, concluding that they are unsuitable for central bank reserves. However, Bitcoin proponents will point to the fact that gold’s non-monetary value is a fraction of its total market capitalization and the remaining value is derived from its monetary premium. Other stores-of-value assets, like art and most notably real estate have significant monetary premiums as well, which has contributed to the housing affordability crisis. Therefore, Bitcoin’s lack of intrinsic value is in fact argued to be a benefit. 

In summary, the store of value diagnosis for Bitcoin is compelling especially in light of its scarcity and growing adoption as an investment. Many real-world investors treat it as such, and its nickname “digital gold” encapsulates this role. While pundits are unable to articulate a duration by which an asset can be deemed a store-of-value, it is notable that historically holding bitcoin for only fours years sees an investor in profit despite any significant drawdowns during that time period. As volatility continues to dampen over time and global acceptance increases, Bitcoin will fill the store of value role more fully.

Bitcoin as a Currency (Medium of Exchange)

Another lens to examine Bitcoin through is as it was originally described in Satoshi Nakamoto’s white paper, an electronic peer-to-peer cash system, in other words, a currency for daily transactions. In a differential diagnosis sense, this is akin to asking: is Bitcoin actually functioning like a currency (money) in the economy? The “signs” to check for this would be widespread use in payments, pricing of goods in BTC, and merchant acceptance, among others.

The reality is mixed. Bitcoin can and does function as a medium of exchange in certain contexts, but it has not achieved the broad acceptance of a national currency or even a widely used alternative currency (like the dollar in international use). There are a few high-profile examples of Bitcoin being used as money. Most notably, El Salvador made Bitcoin legal tender in 2021, meaning vendors can accept it and taxes can be paid in it. This bold experiment provided a testing ground for Bitcoin’s currency use. While it did spur some merchant adoption and a government-backed wallet (Chivo) for citizens, reports indicate that actual day-to-day usage by Salvadorans remains relatively low; many who downloaded the wallet for a signup bonus did not continue using Bitcoin regularly. Still, in El Salvador Bitcoin is used for some transfers, and importantly, it can be used for things like remittances from abroad, frequently at lower fees than Western Union. 

In the private sector, there are merchants worldwide that accept Bitcoin. Thousands of online retailers allow Bitcoin payments via payment processors that convert Bitcoin to local currency. Companies like Overstock.com were early adopters of accepting Bitcoin for goods. Niche industries (tech gadgets, some tourism services, VPN providers, etc.) often cater to crypto-friendly customers. Payment processors like BitPay emerged to facilitate Bitcoin transactions, and more recently, Lightning Network payment apps have enabled instant Bitcoin purchases (for example, some fast-food franchises in El Salvador or even certain cafes in Europe using Lightning and most recently Steak Shack). However, when we zoom out, the penetration of Bitcoin in daily commerce is quite small relative to traditional payment methods. In the “Western world,” as one analysis noted, modern banking and payment apps are so convenient that there’s little consumer-driven reason to switch to using Bitcoin for everyday purchases. Swiping a credit card or using Apple Pay is often easier and less volatile than spending Bitcoin, which could appreciate 10% next week (leading many to rather hold it). This ties into a classic economic problem: Bitcoin’s volatility encourages a “hoard rather than spend” mentality (Gresham’s law in action–people spend the currency they expect to depreciate, and hold the one they expect to appreciate). Indeed, Bitcoin’s deflationary bias (supply limited, demand growing) makes it appealing as a store of value but problematic as a currency–users expect it to rise in value over time, so they are disinclined to part with it.

Market behavior also reflects this. During times when Bitcoin’s price is surging, on-chain data often shows a decline in Bitcoin being used to pay merchants (why buy a pizza with Bitcoin if its value in dollars might double?). Conversely, when the price is flat or in a gentle downtrend, spending picks up a bit. This is the opposite of what you want for a stable medium of exchange, where usage should not be so tied to speculative considerations. Additionally, Bitcoin’s base layer can process only about 7 transactions per second, and in periods of congestion, fees can climb significantly. However, this is being mitigated by second-layer networks like Lightning, which can enable near-instant and very low-cost transactions by handling them off-chain and settling to the blockchain later. The Lightning Network has grown substantially (see next section on payments), which directly addresses Bitcoin’s currency functionality by making small transactions feasible.

Institutional interest in Bitcoin as a currency is lukewarm. While some companies flirted with it – notably, Tesla in 2021 announced it would accept Bitcoin for car purchases (only to suspend this later, citing environmental concerns), most large corporations have not adopted Bitcoin as a routine payment method. Fintech apps like PayPal, Cash App, and Revolut allow users to buy, sell, and sometimes pay with Bitcoin, but generally if a user “pays with Bitcoin” through these apps, the Bitcoin gets converted to fiat for the merchant. Thus, merchants often don’t even realize they accepted Bitcoin, they just get dollars; it’s more of a marketing of user choice than a new currency regime.

Regulators treat Bitcoin-as-currency with a mix of dismissal and concern. On one hand, as mentioned, tax authorities like the IRS categorize Bitcoin as property, not currency, meaning every time you spend Bitcoin, it’s a taxable event (you incur capital gains or losses on the Bitcoin from the time you acquired it to the time you spent it). This is a huge deterrent to using it as everyday money. It would be akin to having to calculate gains every time you spend a Euro that might have strengthened against the dollar since you got it. Only if Bitcoin’s legal classification changes (or if tax laws create de minimis exemptions for small crypto transactions, as some countries have started to consider) will this friction reduce. 

In summary, Bitcoin’s “currency” diagnosis is only partially confirmed. Bitcoin is technically capable of being a currency and is being used as such in specific niches and geographies, but the scale is far from making it a global currency or even a major secondary currency. Many analysts conclude that Bitcoin’s path to becoming a true currency would first require it to stabilize as a store of value, a viewpoint illustrated by an investor quoted in 2023: “Bitcoin can’t function as a medium of exchange without first being trusted as a store of value.” At present, the everyday currency use-case remains secondary and “inferior to other forms of payment” in practice (as it applies to non-authoritarian nations, like the United States. However, nearly half of the global population lives under authoritarian regimes where confiscation and inability to access the financial infrastructure necessitates access to a permissionless and non-discriminatory monetary network). Future technological improvements (wider Lightning Network use, normalization of bitcoin payments in apps) and legal changes would determine if this diagnosis strengthens or is ruled out in the long run.

Bitcoin as a Decentralized Payment Network

Closely related to the currency function, but distinct in emphasis, is the idea of Bitcoin as a decentralized payment network or settlement system. Here the focus is not so much on Bitcoin as the unit of account or medium of exchange, but Bitcoin as the rail over which value moves.

The Bitcoin network has proven itself as a reliable global settlement network. It operates 24/7, has never been hacked or halted at the protocol level since launch, and can settle large volumes (in value) of transactions. For instance, tens of billions of dollars worth of Bitcoin can be (and have been) transferred in minutes across the network for fees often far less than 0.1% of that value, something Western Union or bank wires would struggle to match at that scale and speed. This makes Bitcoin attractive for cross-border transfers, large remittances, or any situation where traditional banking is slow, expensive, or restricted. Empirical data shows that a meaningful fraction of Bitcoin activity comes from such transfers. Even the average transaction size on Bitcoin (on-chain) tends to be high (often thousands or tens of thousands of dollars, unlike, say, typical retail transactions), indicating that people are batching payments or moving big sums consistent with it being used as a settlement layer. A notable recent example was the sale of approximately 80,000 bitcoin, nearly 10 billion dollars, with minimal impact on the bitcoin market, an acknowledgment that its depth is robust. 

The emergence and growth of the Lightning Network since around 2018–2019 greatly enhanced Bitcoin’s capability as a payment network for small and frequent transactions. Lightning is a second-layer network that allows users to open payment channels and transact instantly with each other (and by extension, with the whole network via routed channels), only settling net results to the Bitcoin blockchain occasionally. This approach overcomes Bitcoin’s throughput and latency limitations for everyday transactions. Lightning’s adoption metrics are illuminating: by Q2 2024, one major payment processor (CoinGate) reported that 16.6% of its Bitcoin payments were flowing through Lightning, up from just 6.5% two years prior. That share was projected to hit 20% by late 2025 at current growth rates. In absolute terms, Lightning usage exploded: in August 2023, the network handled an estimated 6.6 million routed transactions, a 1,212% increase from August 2021. The network’s capacity (the amount of BTC locked in Lightning channels) grew to over 5,000 BTC by early 2024, signaling that more value is available for instant transfer at any time. Additionally, the number of Lightning nodes and channels has increased, with some estimates of active Lightning users ranging up to 1 million. These are promising signs that Bitcoin’s payment utility is gaining traction, particularly for use cases like micropayments (e.g., streaming small payments for content), remittances (e.g., Strike app enabling remittances to the Philippines or Africa via Bitcoin’s network), and merchant payments (like buying food or mobile top-ups with Bitcoin instantly).

Real-world examples underscore this. In El Salvador, the Chivo wallet uses Lightning under the hood, meaning users can pay in Bitcoin at a pupusa stand and get nearly instant confirmation. In Nigeria, where young people have faced currency devaluation and fintech restrictions, Bitcoin (often via Lightning or stablecoins on crypto rails) has become a tool to move money in and out of the country or conduct business internationally. During the Russian-Ukraine war in 2022, Bitcoin and crypto transfers were used to send donations directly to Ukraine when traditional channels were constrained, a demonstration of the network’s neutrality and availability. The censorship-resistant nature of the Bitcoin network (no central party can block a transaction) gives it an edge in scenarios where payments might otherwise be censored or capital controls imposed. For instance, individuals in countries under heavy sanctions or financial repression have used Bitcoin to circumvent those barriers, essentially using the network as a lifeline for commerce or personal finance when banks would not serve them.

Institutions are gradually recognizing this payment network value. Companies like Jack Dorsey’s Block (Square) not only support Bitcoin buying but have integrated Lightning to allow fast transfers between their users. Similarly, X briefly enabled Bitcoin Lightning tipping, showcasing how content platforms could incorporate decentralized payments. Several Bitcoin ATM networks have sprung up globally, converting cash to bitcoin and vice versa, which is another piece of payment infrastructure bridging the Bitcoin and fiat worlds. Furthermore, traditional remittance companies are exploring Bitcoin: in 2021, Strike (a Lightning-based payments app) partnered with Shopify and alternative remitters, hinting that under the hood, Bitcoin could be used to settle transfers even if users see dollars. 

Regulatory attitudes towards Bitcoin as a payment network focus heavily on financial integrity and consumer protection. Agencies like FinCEN in the US treat entities dealing with Bitcoin transactions as money transmitters, requiring them to implement Anti-Money-Laundering (AML) and Know-Your-Customer (KYC) programs. This is why exchanges and payment providers ask for ID verification. There is an inherent tension: Bitcoin the network is open and pseudonymous, which regulators worry can facilitate illicit transfers. Indeed, early reputational hits like Silk Road (where Bitcoin was the medium of payment for illegal goods) created a lingering association of Bitcoin with nefarious payments. However, data in recent years has shown that illicit activity is a tiny fraction of Bitcoin usage (Chainalysis estimated in 2023 that only 0.24% of crypto transactions were linked to illicit activity), and law enforcement has gotten quite adept at tracing Bitcoin on-chain when needed (Bitcoin’s ledger is transparent, ironically making it less ideal for criminals who leave a permanent trail). Regulators now acknowledge both sides: they warn about the risks of unregulated transfers but also are aware that completely banning crypto payments would simply push it underground and forfeit potential efficiency gains. 

Bitcoin clearly exhibits the properties of a decentralized payment system: it’s like a global highway for money where anyone can drive, and recent developments (Lightning) have expanded its lanes for smaller vehicles (micropayments). This “diagnosis” holds strong–Bitcoin is being used for payments, though not universally, it fills certain gaps that traditional networks leave. The future will tell if this payment role will grow to equal or surpass the store-of-value role, or if Bitcoin will mostly be a settlement layer for large transfers while the Lightning Network handles retail transactions. 

Bitcoin as an Ideological Movement

Beyond the technical and economic characterizations, Bitcoin can also be viewed through a social and ideological lens. In this diagnosis, Bitcoin is not just a type of asset or network, but the centerpiece of a movement, a set of ideas and values shared by a community, almost like a social phenomenon or belief system. Indeed, Bitcoin’s rise sprang from the cypherpunk movement that advocated for privacy, decentralization, and freedom from centralized authorities (especially central banks and governments in the context of money). One could say Bitcoin carries an ideological “virus”–many who come into contact with it adopt not just a new asset, but a new worldview about how money should work.

The “symptoms” of an ideological movement are certainly present. There is a strong identity among Bitcoin proponents. They have a lexicon (“HODL”, “stack sats”, “FUD”, etc.), heroes (Satoshi Nakamoto, Hal Finney, etc.), and myriad global conferences and meetups. The Bitcoin white paper and the timing of Bitcoin’s launch, January 3, 2009, in the midst of the global financial crisis, had a not-so-subtle political undertone: the very first block’s coinbase contained the text “Chancellor on brink of second bailout for banks”, referencing a headline about bank bailouts. This was widely interpreted as a commentary on the irresponsibility and financial privilege of the banking system and a motivation for Bitcoin’s existence (a monetary system outside of the state-controlled paradigm). From that seed, an ideology grew. Today, Bitcoin proponents often espouse that Bitcoin’s technology is inherently more trustworthy than legacy institutions and that holding Bitcoin is a moral obligation juxtaposed to the Cantillon (the occurrence of how initial recipients of newly created money in an economy experience a disproportionate benefit compared to those who receive the money later, i.e., the top 1% versus everyone else) status quo.

Real-world adoption of Bitcoin often has an ideological driver. For example, some people in economically stable countries got into Bitcoin not because they needed a new currency or investment, but because they resonated with the philosophy–distrust of central banks and Wall Street after 2008, desire for more personal control over finances, or simply the appeal of supporting a groundbreaking technology. In countries with oppressive regimes or unstable currencies, adopters sometimes use Bitcoin as a form of protest or self-preservation, for instance, dissidents in Belarus or Nigeria who were cut off from banking have used Bitcoin to receive funds and thus implicitly endorsed the idea of uncensorable money. The narrative of financial freedom is a rallying cry: “be your own bank” is a slogan that captures the empowerment ideology. 

Treating Bitcoin as an ideological movement yields a rich understanding of its social dynamics. This diagnosis is strongly supported by the cultural and behavioral “symptoms” observed: a community with shared beliefs and jargon, a narrative of opposition to incumbent systems, and a tendency for group reinforcement of a thesis. Like any ideology, this has both positive aspects (strong community support, long-term vision, resilience in the face of setbacks) and negative ones (potential dogmatism, ignoring contrary evidence, polarizing rhetoric). For many in the public and media, these biases and the almost evangelical promotion by Bitcoiners is part of why Bitcoin can be polarizing. Understanding this helps explain why debates around Bitcoin often sound less like finance and more like arguments between different worldviews.

Cognitive Biases in Public and Institutional Perceptions of Bitcoin

Having examined Bitcoin through various diagnostic lenses, it is equally important to recognize how our interpretation of Bitcoin can be skewed by cognitive biases. In clinical medicine, cognitive biases often lead doctors to misdiagnose a patient. For example, by focusing too quickly on one possible illness or by letting irrelevant information color judgment, errors can be made. The world of finance and technology is similarly rife with biases that affect how investors, the public, media, and regulators perceive Bitcoin. Here, we identify several key cognitive biases (analogous to those in clinical reasoning) and explain how each has manifested in the context of Bitcoin:

• Premature Closure – jumping to a conclusion about Bitcoin’s nature or fate without considering all evidence.

  
  

• Anchoring Bias – becoming fixated on initial information or first impressions of Bitcoin (such as an early price or narrative) and filtering new information through that lens.

  
  

• Confirmation Bias – seeking and valuing only the information that confirms one’s pre-existing view of Bitcoin, while ignoring contradictory data.

  
  

• Availability Bias – overemphasizing recent or easily recalled events (like spectacular news headlines) when evaluating Bitcoin’s risks or value.

  
  

Premature Closure

Premature closure in diagnosis occurs when the decision-maker seizes on an initial conclusion and stops considering other possibilities. In the hospital setting this can be experienced when a hospitalist physician assumes the diagnosis an emergency medicine physician has concluded is correct without further consideration of additional evidence. For example, a patient with respiratory wheezing and low oxygen levels could be concluded to be an asthma exacerbation by the ER physician when it turns out to be heart failure (the symptom of “wheezing” and low oxygen being present in both conditions). In the story of Bitcoin, this bias can be seen in how quickly some individuals and experts judged Bitcoin’s ultimate fate or purpose without full evidence, especially in its earlier years.

For example, in the aftermath of the Mt. Gox exchange collapse in 2014 (when hundreds of thousands of bitcoins were lost and the price crashed about 80%), many observers, including seasoned economists, declared Bitcoin dead. They saw the evidence of a massive failure and concluded that the “Bitcoin experiment” was essentially over. This pattern has recurred: nearly every time Bitcoin goes through a dramatic downturn, a wave of obituaries appears in the media pronouncing that Bitcoin is finished. This is a form of premature closure, concluding that a price crash (symptom) equals a fatal flaw (terminal diagnosis for Bitcoin) without considering counterevidence such as its recoveries or ongoing development. By mid-2025, Bitcoin has been declared “dead” 430 times in print or online sources, yet it not only has survived but thrived afterwards in each instance. Each such obituary could be seen as a premature closure by the author: a rapid judgment (often during peak pessimism) failing to anticipate Bitcoin’s resilience.

Another example is early critics concluding that Bitcoin would only ever be used by criminals (because it first gained notoriety via the Silk Road marketplace). They saw one use-case and prematurely closed the book on Bitcoin as purely a criminal tool, not foreseeing mainstream adoption. While illicit usage was one of Bitcoin’s initial prominent use cases, it soon became evident that legitimate uses far outgrew the illicit ones. Now illicit transactions are a tiny fraction of Bitcoin activity. Yet, those who made up their minds in 2011 or 2012 that “Bitcoin = black market money” often stuck to that narrative far too long, ignoring the evolving reality.

In cognitive terms, premature closure often pairs with other biases–someone might anchor to an early perspective and then prematurely conclude nothing fundamentally will change. In Bitcoin’s case, many regulators or traditional finance experts formed an early negative opinion (e.g., “it’s a scam/bubble”) and then for years did not update that view, even as new data (institutional adoption, technological improvements) emerged. Only recently have some begun to reopen the differential and consider that Bitcoin might have legitimate value, which shows the strong grip of that initial premature closure.

The persistence of these rash obituaries is almost comical in hindsight (whole websites track these failed predictions as a reminder). It teaches the lesson that with novel phenomena like Bitcoin, one should avoid jumping to conclusions. Keeping an open mind is as crucial in finance as in medicine. The continued survival and growth of Bitcoin has, in a sense, refuted many premature closures, but biases being what they are, new voices still emerge with each cycle to claim “this time it’s truly dead,” often ignoring that the patient has repeatedly

recovered.

Anchoring

Anchoring bias is the tendency to rely too heavily on the first piece of information encountered (the “anchor”) when making decisions. This often occurs in the clinical setting with laboratory data or radiological findings. For example, if a blood test called pro-BNP is elevated, therefore the patient has heart failure, or the presence of an abnormal opacity on a chest x-ray, therefore the patient has pneumonia. X therefore Y, without considering additional information including the patient’s history of present illness erroneously anchors a clinician to one data point. In Bitcoin’s context, anchoring can happen with respect to price, use-case, or perception.

A clear example is price anchoring. Imagine an investor first heard about Bitcoin when it was $1,000. That number can become an anchor for what they consider “normal” or “expensive.” So later, when Bitcoin rose to $5,000, an anchored person might feel “Ugh, I missed it, $5k is too high compared to $1k.” Many people indeed experienced this: they mentally anchored on Bitcoin’s past low prices. A CoinDesk article explains this scenario: “You heard about bitcoin at $1,000 and didn’t invest. It goes up to $5,000. You don’t want to buy anymore because it’s too expensive, in your mind. But that’s because you’ve anchored it to $1,000.” This belief is also related to unit bias (buying cryptocurrencies worth pennies, and having more of those tokens compared to less bitcoin, believing the price will increase similarly), a bias alternative cryptocurrency issuers are well aware of and capitalize on.

Anchoring occurs in narrative as well. For instance, early media coverage anchored Bitcoin’s image to the “dark web drug currency” story. Years later, even as legitimate volume swamped Silk Road-era usage, some politicians or commentators would reflexively respond to Bitcoin with “Isn’t that what people use to buy drugs?” The first impression anchored their understanding, and they under-weighted subsequent information about mainstream adoption or compliance improvements. Similarly, some anchored on the idea “Bitcoin is just for crypto bros” based on its early user base, and later had trouble updating that mental model when Bitcoin user demographics broadened significantly.

For institutions, anchoring bias was evident when established financial models were applied rigidly. Many analysts anchored on metrics like P/E ratios or discounted cash flow, which don’t apply to Bitcoin because it’s not a company with earnings. Anchored to traditional valuation methods, they initially judged Bitcoin worthless or in a bubble, because by those methods it indeed has no intrinsic value or yield. It took time for some to shift to new anchors (like network adoption metrics or stock-to-flow ratios, etc.,). Anchoring to gold as a direct analogy also colored some views–people would say “Gold is $20 trillion, Bitcoin is $2 trillion, so maybe it can 10x” or conversely “gold has millennia of history, Bitcoin is new, so Bitcoin will never catch gold.” These starting points often drove the conclusions more than objective analysis did.

The key to overcoming anchoring is consciously adjusting one’s frame of reference with new data. For example, early adopters anchored Bitcoin’s value not to its tiny starting price but to future possibilities (“if Bitcoin captures X% of gold’s market, it should be worth Y”). Those folks re-anchored their expectations upward and thus were not deterred by the rise from $1000 to $5000. They saw it as still “cheap” relative to their recalibrated anchor. On the other hand, latecomers often remain anchored to the price at which they first heard of or bought Bitcoin, influencing their emotional response to market moves.

In public perception, anchoring means first impressions are hard to shake. So, whoever learned about Bitcoin first through a sensational negative story likely carries some subconscious bias from that initial anchor, unless they actively educate themselves beyond it. This is why education and re-framing are important: a conclusion supported in the research that demonstrates an individual's impression of Bitcoin is most closely tied to how knowledgeable one is about it. To set new, more relevant anchors (like global user numbers, institutional adoption, ETF flows etc.) rather than “it went from $1 to $1000!” which, while true, isn’t a useful anchor for future potential.

Confirmation Bias

Confirmation bias is the tendency to favor information that confirms one’s existing beliefs and dismiss information that contradicts them. In the hospital setting this can occur with patients who have frequent admissions for the same medical issue. A physician may erroneously conclude that a patient's current diagnosis is the same as what it has been previously because of the recurrence of the same prior diagnosis–confirming one’s existing beliefs about the patient and dismissing new evidence to the contrary. In the context of Bitcoin, confirmation bias is rampant on both sides of the debate, among avid supporters and vehement critics, and even within institutions deciding on whether to adopt or reject Bitcoin.

For Bitcoin enthusiasts, confirmation bias often manifests as living in an echo chamber of bullish news and narratives. They follow social media influencers and news sources that are pro-Bitcoin and tend to ignore or label as “FUD” (fear, uncertainty, doubt) any negative reports, whether it’s a future security issue, a regulatory warning, or a critique of Bitcoin’s energy usage. As a CoinDesk article notes: a person might “only follow people who say good things” about a specific coin and automatically blame negative news on FUD or hostility. This creates a self-reinforcing bubble of belief–any evidence that Bitcoin might have risks or downsides is dismissed as misinformation or temporary, while any news that supports the vision of Bitcoin’s success (no matter how speculative) is amplified and accepted. For example, when a nation like El Salvador adopts Bitcoin, the pro-Bitcoin community trumpets it endlessly (“see, global adoption is inevitable!”), but if a country bans Bitcoin, the same community might say “banning is bullish–it means Bitcoin is working, governments are scared” or simply ignore the news as irrelevant. This sort of filter means Bitcoiners sometimes underestimate real challenges (like how slow merchant adoption truly is, or how significant regulatory hurdles could be) because their information diet is skewed towards confirming the belief that Bitcoin will become the next global reserve currency. 

On the flip side, Bitcoin skeptics also fall prey to confirmation bias. If one strongly believes Bitcoin is worthless or a scam, one will find ample negative news to reinforce that view: hacks, frauds, market crashes, environmental critiques, etc. A skeptic might read only mainstream financial news that often skews negative on Bitcoin, and might ignore positive developments such as increasing regulatory clarity, increasing global adoption, and humanitarian benefits. They may also continuously cite each bubble burst as “proof” they were right, while dismissing the subsequent recoveries as anomalies or “greater fool” dynamics. For instance, an economist convinced that Bitcoin is just a bubble might cherry-pick data showing the number of illegal transactions or the volatility vs. USD, but not acknowledge data on legitimate volume growth or volatility declining over the long term. High-profile Bitcoin skeptics like Peter Schiff (a gold proponent) have been noted to exhibit this bias: he interprets every dip as vindication and tends not to mention when Bitcoin hits new highs except to say “it will crash again.” In essence, both camps can be guilty of seeking what they want to see.

Media coverage can suffer from confirmation bias as well, sometimes driven by editorial stance. If a publication’s narrative is “Bitcoin is dangerous,” it will highlight stories that fit that (e.g., scams, criminal usage, losses) and give less prominence to stories of adoption or innovation, thus confirming their readers’ likely existing cautious stance. These editorial positions highlight another bias known as the Gell-Mann effect whereby individuals will critically evaluate journalistic reports in their domain of expertise, yet continue to trust reporting in other areas despite recognizing similar errors and inconsistencies.

Confirmation bias has led to polarization: Bitcoin fans and foes often talk past each other, each armed with their curated set of “facts.” The lesson is to actively seek information that challenges your view on Bitcoin. If you’re bullish, ask “what evidence could prove me wrong or what am I ignoring?” If bearish, ask the reverse. The same process occurs in medicine: what evidence would refute or validate my diagnosis. Without this effort, one can easily find oneself in a one-sided narrative that feels airtight but is really just self-reinforcing. Many mistakes in both investment and regulation around Bitcoin can be traced to people only listening to the echo of their initial beliefs.

Availability Bias

Availability bias (or the availability heuristic) is the tendency to judge the likelihood or importance of something by how easily examples come to mind, often favoring vivid, recent, or emotionally charged situations. In medicine, this bias often shapes a physician’s diagnostic lens most notably when a recent traumatic patient encounter has occurred, which in turns colors present diagnostic perceptions. In the context of Bitcoin, availability bias often means that people’s perceptions are disproportionately shaped by the most dramatic news stories about Bitcoin, rather than by statistical reality or long-term trends.

For the public and media, the most available images of Bitcoin might be: huge price crashes, stories of people losing fortunes, sensational criminal cases, or conversely, someone making millions overnight. These kinds of stories stick in memory. So, when thinking about Bitcoin, a person might immediately recall the 2017 bubble and crash, or the Mt. Gox hack, or the fact that a friend lost money in a scam, and those memories will heavily color their evaluation. If the accessible memory is “Bitcoin crashed 80% quickly,” one might conclude “Bitcoin is extremely risky and always crashes,” even though it also recovered and eventually hit new highs, but that latter part might be less emotionally imprinted if one didn’t directly experience it.

Media cycles feed availability bias. Headlines like “Bitcoin Plummets 20% in One Day” or “Teenager Becomes Bitcoin Millionaire” are eye-catching and thus more likely to be remembered by the casual observer than a nuanced analysis of year-over-year adoption rates. As a Binance education blog noted, “if there’s a lot of dramatic news in one’s feed about a cryptocurrency dropping in value, investors might overreact,” making hasty decisions because that recent vivid information dominates their mind. For instance, in a sudden price drop, the fear induced by fresh headlines can make people panic sell, forgetting that such drops have happened before and often recovered– they are reacting to what’s most available in memory (the current plunge and scary articles), not an objective long-term picture.

Another example: scams and hacks get huge press. When a big exchange is hacked it’s front-page tech news. So a lot of people, when asked about bitcoin, first think of scams or hackers. This availability bias can lead to an overestimation of how much Bitcoin usage is illicit or scam related. In reality, data shows only a tiny fraction of Bitcoin activity is illicit (as mentioned, 0.24% in 2023). But because the illicit uses are more sensational, they dominate the narrative. Similarly, one big story of someone forgetting a hard drive with 10,000 bitcoins on it (and thus losing hundreds of millions of dollars) gets widely reported, making people think “wow, it’s easy to lose all your money in Bitcoin.” While user error is a risk, the prevalence of such loss is not high statistically, but that one vivid case becomes the emblem in many minds.

Availability bias also works in the other direction for those deep in the Bitcoin ecosystem: they might see a lot of positive stories in their circles, everyone around them on X is talking about Bitcoin being adopted here or there, price doubling, etc., which are vivid for them, and thus they might overestimate how mainstream Bitcoin actually is. For example, in the last bull run, crypto folks commonly thought crypto was going utterly mainstream because they saw athletes endorsing it, companies putting Bitcoin on balance sheets, NFT art selling for millions. Those were highly visible events within the community and media. But outside that bubble, the average person still didn’t own any crypto, governments were far from integrating it, etc. So Bitcoin enthusiasts, and the crypto ecosystem at large, might have overestimated true adoption because the examples available to them were all pointing one way.

The illusory truth effect, related to availability, means if something is repeated often, people start to believe it’s true. In Bitcoin’s case, repeated myths or narratives can become “truthy.” For example, the idea “Bitcoin is mostly used by criminals” was repeated so often in early years that many still believe it, even though empirical evidence doesn’t back it. It feels true because they’ve heard it a lot (availability and repetition), not because it is statistically true. Conversely, within crypto communities, mantras like “Bitcoin is the best performing asset of the decade” get repeated so often that people might gloss over periods where it underperformed or the caveats, because that phrase is readily at hand to justify one’s confidence.

Institutions can fall prey to availability bias by overweighting recent market conditions. If a bank’s risk committee considered Bitcoin in early 2018, right after a crash, the most “available” info was the crash and negative press making them likely to say “no” to involvement due to recency bias of that bust. If reconsidering in 2021 after months of positive news and price gains, the available info was success stories, possibly making them more open (or conversely fearing they’d missed out and now need to act).

Overcoming availability bias requires consciously seeking objective data, not just memorable anecdotes. For the public, that means looking at, for example, what portion of Bitcoin transactions are illicit (and comparing to illicit usage of fiat by value. Far more crime is done in USD globally than in bitcoin). Or remembering that yes, Bitcoin “died” in the media hundreds of times, but each time it came back, so the salient memory of the crash shouldn’t overshadow the full cycle. Educating with data, like the Chainalysis figure that only 0.24% of crypto transactions were illicit, helps combat the “just used by criminals” narrative that availability bias fosters. Likewise, pointing out that although Bitcoin has crashed >50% multiple times, it also gained >1000% in other periods, balancing the mental availability of crashes with that of gains.

In essence, availability bias in Bitcoin leads to miscalibration of risk and importance. Dramatic events get overemphasized. A healthy approach would be to recall that for every sensational story, there might be thousands of mundane positive uses not making news (like people quietly using Bitcoin for small remittances every day, or long-term investments steadily growing). Keeping those less flashy facts in view can temper the distortion caused by the loud events.

Assessment and Plan

Analyzing Bitcoin through a clinical reasoning framework with differential diagnoses and awareness of cognitive biases provides a structured way to understand this complex emerging technology. We identified several plausible “diagnoses” for Bitcoin’s purpose: a store of value akin to digital gold, a nascent currency and payment method, a robust decentralized payment network, and an ideological movement about financial sovereignty. In truth, Bitcoin embodies elements of all of these roles. The evidence shows an asset that is simultaneously an investment and a speculation, used by some as money and by others as a tech backbone–all wrapped in a narrative charged with ideology and optimism for a new paradigm.

Crucially, our evaluation also highlights how perceptions of Bitcoin are shaped, and sometimes distorted, by cognitive biases. Just as a doctor must be careful not to lock onto a diagnosis too soon or be swayed by salient anecdotes, those assessing Bitcoin must remain mindful of biases like anchoring on first impressions, seeking only confirming evidence, or overweighting dramatic news. Many early dismissals of Bitcoin can be traced to such biases (e.g. anchoring to the idea that money must be physical or have government backing, or premature closure after observing one boom-bust cycle). Conversely, some over-zealous endorsements ignored real risks due to confirmation and availability biases within echo chambers of belief. Emotional over exuberance always risks loss of objectivity.

By adopting a clinical, diagnostic mindset, we aim to avoid those pitfalls looking at the totality of evidence (market data, trends, attitudes) and periodically reassessing in light of new evidence. Bitcoin has proven resilient, surviving numerous “fatal” prognoses, and it has also proven protean, evolving in how it’s used and understood. A differential diagnosis approach reminds us that multiple interpretations can hold truth and that our understanding should be updated as conditions change. Finally, just as patients are not the sum of their diagnoses or symptoms, Bitcoin is not easily characterized as one solitary thing. Rather, as a new technology we should refrain from normative valuations and examine Bitcoin with an objective lens but with the bedside manner we would want for any patient.

Sources:

• Barnett Waddingham Blog – “Bitcoin: Currency, store of value or pure speculation?” (Feb 17, 2025) – Analysis of Bitcoin’s uses and long-term valuebarnett-waddingham.co.ukbarnett-waddingham.co.uk.

  
  

• Gate.io Research – “Changing Narratives in the Crypto Industry” (Aug 5, 2024) – Discussion of how Bitcoin’s public narrative evolved from electronic cash to digital goldgate.com.

  
  

• Fidelity Digital Assets – “Bitcoin as an Aspirational Store of Value” and “Bitcoin’s Potential as a Leading Macro Asset” – Research noting Bitcoin’s fixed supply and its store-of-value proposition for investorsfidelitydigitalassets.comfidelitydigitalassets.com.

  
  

• Finbold News – “Bitcoin has been declared ‘dead’ more times in 2025 than all of 2024” (May 14, 2025) – Reports 430 Bitcoin “obituaries” since inception, illustrating repeated premature conclusions of its demisefinbold.comfinbold.com.

  
  

• Federal Reserve Bank of NY Staff Report No. 1052 (2023) – Analysis treating Bitcoin as a speculative asset with no intrinsic value, responsive mainly to future price expectationsnewyorkfed.org.

  
  

• World Bank Blog – “Crypto-assets: Unfit for central bank reserves today” (Sept 23, 2024) – Argues crypto’s lack of intrinsic value and high volatility make it unsuitable as reserve asset (not widely accepted as money or store of value yet)blogs.worldbank.orgblogs.worldbank.org.

  
  

• Coingate (V. Barbaravičius) – “Lightning Network Stats: Rising Adoption” (May 15, 2025) – Reports rapid growth of Bitcoin’s Lightning Network usage in payments (share of BTC payments rising from 6.5% to 16.6% in 2 years)coingate.comcoingate.com.

  
  

• Rick Wash et al., “The Most Trustworthy Coin: How Ideology Builds and Maintains Trust in Bitcoin” (Proc. ACM, 2019) – Study of Bitcoin online community finding a strong ideological “True Bitcoiner” belief system that persists despite contrary evidencerickwash.comrickwash.com.

  
  

• Binance Academy – “Availability Bias and Illusory Truth in Crypto Misconceptions” (Sept 20, 2024) – Explains how vivid repeated misinformation (e.g., “crypto is mostly scams”) can skew public perception; notes only 0.24% of crypto transactions were illicit in 2023binance.combinance.com.

  
  

• Nasdaq/CoinDesk – “Avoiding Top Cognitive Biases in Crypto Trading” (Oct 24, 2022) – Describes biases like anchoring and confirmation bias with crypto examplesnasdaq.comnasdaq.com.

  
  

• MDPI Journal (Hedman et al., 2021) – “The Tales of Bitcoin: A Metastory of Bitcoin Narratives” – Identifies media narratives (Dark Side, Tulip Mania, Bright Side, etc.) showing how framing of Bitcoin changed over timemdpi.com.

  
  

• 99Bitcoins/Bitcoin Obituaries archive – Data on frequency of media declaring Bitcoin “dead,” highlighting cognitive biases in recurring negative predictions.