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SCIENCE BEHIND CRYPTO MISCONCEPTIONS: CONFIRMATION BIAS

2024-12-27


MAIN TAKEAWAYS

 * Confirmation bias causes us to seek out information that reinforces our
   pre-existing beliefs, often ignoring evidence that contradicts them.

 * This bias significantly reinforces both everyday and crypto-related false
   beliefs ranging from “moon landing was faked" and “cryptocurrency is solely
   used for illegal activities.”

 * Other biases work together with confirmation bias, creating a cycle that
   distorts our perception of facts.



Ever wonder why it's so hard to change someone’s mind, even when the facts are
blatantly laid out in front of them? The culprit is often confirmation bias, a
cognitive mechanism that makes us seek out and believe information that fits our
pre-existing views. Whether it's historical myths or cryptocurrency
misconceptions, confirmation bias plays a powerful role in shaping how we select
and process information.

In the finale of this series, we’ll unpack the science behind confirmation bias
and explore how it fuels some of the most persistent crypto myths out there.


CONFIRMATION BIAS

Why do we cling to false beliefs, even when faced with evidence that shatters
them? Confirmation bias is often to blame. Defined by Britannica as the tendency
to “process information by looking for, or interpreting, information that is
consistent with existing beliefs,” confirmation bias misleads us by filtering
reality through a lens of comfort.

This means we give more weight to what we already believe and sideline anything
that challenges those beliefs. This mental habit becomes especially potent when
we’re emotionally invested in an issue — making it hard to see the full 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 the contradictory,
fragmented online information environment we navigate today, this deep-seated
bias gets activated to preserve this worldview consistency in the face of
constant changes.


MYTHS THAT JUST WON’T DIE: HOW CONFIRMATION BIAS KEEPS FALLACIES ALIVE

No achievement, not even landing on the moon, is immune to the distortions of
confirmation bias. 

Despite extensive photographic and video evidence, as well as testimonies from
astronauts and scientists, the moon landing conspiracy persists. Believers latch
onto selective "evidence" that confirms their suspicions while dismissing
overwhelming proof to the contrary. They filter out anything that doesn’t align
with their pre-established narrative. This phenomenon shows how even
well-documented historical events can be dismissed as untruths when people allow
their preconceptions to guide their interpretation of the facts.

Another widespread misconception shaped by confirmation bias is the belief that
people can multitask effectively.

Despite extensive scientific research showing that the human brain struggles to
focus on multiple tasks simultaneously, many people still believe they can
handle various tasks at once with no decline in performance. Studies show that
multitasking leads to more errors and reduces productivity, but individuals
often focus on rare instances where they believe they’ve successfully
multitasked. Confirmation bias reinforces this belief, leading people to ignore
evidence that concentration and efficiency suffer when they attempt to juggle
too many tasks at once.


A CRIMINAL’S PLAYGROUND AND JUST ANOTHER BUBBLE?

Now let’s turn our attention to the world of crypto. If you’ve ever heard
someone say that cryptocurrency is only used for illegal activities, you’ve
encountered a myth deeply rooted in confirmation bias. This idea gained traction
early in crypto’s history, with high-profile cases of drug trafficking and money
laundering dominating the headlines. And while these stories are real, they
represent a tiny fraction of the actual transactions happening on blockchain
networks.

The problem? People are far more likely to remember negative news that fits
their beliefs. Once they’ve formed a mental association between crypto and
crime, confirmation bias ensures they’ll continue filtering out positive
developments — like the fact that less than 1% of crypto transactions are linked
to illegal activities.

The idea that cryptocurrencies are a bubble is another myth amplified by
confirmation bias. We see it every time the market experiences volatility —
skeptics seize the opportunity to claim that crypto is doomed to fail. But just
as in traditional markets, price swings are part of the game, and they don’t
necessarily indicate that the entire asset class is on the verge of collapse.

What confirmation bias does here is it amplifies our focus on short-term
volatility while ignoring the broader, long-term innovations happening within
the crypto space — like the constantly evolving technologies or the growing
adoption of blockchain technology across industries. This selective focus can
lead to skewed perceptions and persistent misconceptions.


THE WHOLE CIRCLE, A WHOLE CIRCUS 

Furthermore, confirmation bias doesn’t operate in isolation; it teams up with
several other cognitive biases to reinforce misconceptions. Here’s how this
interplay might unfold step by step:

First, the anchoring effect may set the stage by introducing an initial piece of
information — let’s say, the idea that crypto is only used for illegal
activities. This first impression sticks, becoming the foundation for how a
person processes everything related to crypto.

Next, confirmation bias may kick in. Once the anchor is established, it
encourages one to seek out information that aligns with their initial belief —
focusing on news stories or articles that confirm the negative aspects of
crypto, while overlooking or downplaying any information that contradicts these
views.

Next, the bandwagon effect can reinforce your belief. As more people around one
— whether through social media, news, or conversations — echo similar negative
sentiments regarding crypto, they might be more inclined to adopt these views
too, believing that if "everyone else" shares a certain belief, it must be
right.

As the narrative grows, the illusory truth effect possibly takes hold. The more
one hears the same ideas about crypto, the more they begin to feel it’s true
regardless of the accuracy of the information. Repetition makes the myth seem
even more believable.

Thereafter, availability bias may lock them in. When negative stories about
crypto dominate the news, they’re easier to recall, and they overshadow any
balanced or positive stories one might come across. These vivid, fear-inducing
examples stay on top of one’s mind, reinforcing your existing beliefs.

Moving forward, status quo bias can play a crucial role in fostering distrust.
People generally feel more secure in the familiar, and traditional financial
systems — like banks and fiat currencies — have long been seen as stable and
trustworthy. Crypto, being a relatively new and volatile asset class, feels
unfamiliar and untested to many. This preference for the status quo means that
even when presented with facts about crypto’s potential, individuals may reject
it simply because it doesn’t align with their comfort zone or what they know.

Finally, the endowment effect may strengthen this distrust. When people have
long been invested in traditional financial systems, whether through time,
energy, or wealth, they tend to overvalue those systems simply because they are
their own. For example, someone who has spent years building wealth using fiat
currencies or investing in stocks might have a hard time seeing the value of
crypto, even when presented with compelling evidence. This emotional attachment
to the familiar makes it difficult to embrace new financial innovations, even if
they could be beneficial.

Together, these biases — anchoring, confirmation, bandwagon, illusory truth,
availability, status quo, and endowment — form a powerful feedback loop that
polarizes human perception, shaping subconscious behaviour. Across the board,
they encourage us to err on the side of caution — often resulting in a
preference for more conservative, socially accepted, and mainstream-popular
beliefs. On the whole, this makes it inherently challenging for any innovative
idea, technology, or approach to gain widespread acceptance, as these biases
reinforce the comfort of the familiar and the safety of the collective
consensus.

In the context of crypto, this feedback loop perpetuates distrust, making it
increasingly difficult to break free from widespread misconceptions. Each bias
further reinforces the others, strengthening initial beliefs over time in a
cyclic manner, creating a barrier for more balanced or informed perspectives to
take root.


BREAKING FREE: HOW TO OVERCOME CONFIRMATION BIAS

Breaking free from confirmation bias isn’t just a small step — it’s perhaps the
key to unraveling a web of faulty 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 fall in with the crowd, reducing the bandwagon
effect, and helps you spot repeated myths for what they are, countering the
illusory truth effect. With availability bias losing its sway, you’ll view
situations more clearly and make better, more informed decisions. Moreover, by
actively questioning the familiar and stepping outside the comfort zone of
established beliefs, you can overcome the status quo bias, opening your mind to
new possibilities. Similarly, by recognizing the endowment effect, you can
detach emotional value from outdated ideas and begin to embrace more practical,
evidence-based viewpoints. Breaking free from confirmation bias is thus the
first domino that can topple the entire chain of biases.

So, how can we counteract confirmation bias? Actively seek out information that
challenges our assumptions! By broadening our media intake, stepping outside
echo chambers, and paying attention to contradictory evidence, can one start to
form a more complete picture.


FINAL THOUGHTS

Confirmation bias clouds our judgment, leading 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 embracing 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 next time you hear a story that perfectly aligns 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 offers valuable insights to
help you recognize and overcome biases like confirmation bias. As we wrap up the
Science Behind Crypto Misconceptions series, revisit earlier entries to better
understand how other biases shape common crypto myths. Stay informed, challenge
your assumptions, and dive deeper into blockchain education with Binance
Academy!


FURTHER READING

 * Ghosts of Crypto's Past: Exorcising Myths About Bad Actors and Lack of Safety

 * The Long Game of Crypto: Understanding Crypto Market Cycles

 * From Joke to Global Phenomenon: What Are Memecoins and Why Are They So
   Popular?



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Article Outlines
Science Behind Crypto Misconceptions: Confirmation Bias
Main Takeaways
Confirmation Bias
Myths That Just Won’t Die: How Confirmation Bias Keeps Fallacies Alive
A Criminal’s Playground and Just Another Bubble?
The Whole Circle, a Whole Circus 
Breaking Free: How to Overcome Confirmation Bias
Final Thoughts
Further Reading
249,217,854 users chose us. Find out why today.
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