Do you need to buy a whole bitcoin?
No you don't have to buy whole bitcoins.
It is not unusual to hear someone say that the price of a bitcoin is too high. Which is because they believe that you need to buy a whole bitcoin. In reality, you do not need to buy a whole bitcoin. It is possible to buy a fraction of a cryptocurrency as well. You can split cryptocurrencies like bitcoin into smaller pieces, for example, 0.005 or 0.0000003 all the way to a millionth of a bitcoin.
-A millionth of a bitcoin is called a Satoshi, after the anonymous creator of Bitcoin, Satoshi Nakamoto
This can be a hard concept for people to grasp, as it really is not usual with currencies that are splittable in this way. In fact, most western countries today have their main currency divided into 100 subunits. Some countries even removed subunits as inflation killed its value. To put an example to this, the dollar is split into cents, where 100 cents is 1 dollar. In cryptocurrency, some currencies are splittable all the way down to a 100th million (like Dash). There are probably currencies which can get even smaller (comment down below if you know any smaller one)
The reason we want to cover this is because of something called “Unit bias”. Unit bias is a curse to coins and tokens with a smaller supply (Smaller amount of total coins). As a coin with a smaller supply gets a very high price per coin. While a coin or token with a huge supply gets a very low price per coin.
Owning 100 coins that are valued at $1 a piece would give you a total value of $100.
Owning 0.1 coins of a currency that is valued at $1000 per coin gives you a total value of the same amount.
Which one felt like the better deal? – let us know in the comments!
As a newcomer to cryptocurrency, you would believe that a cheaper coin means a better deal. But they forget to look at the total supply of the coin or token and the price combined. These together make up the market cap of the coin. The market cap is the total value of all coins multiplied by the price. Market cap is great for comparing cryptocurrencies as it contains both the total supply and price per coin.
The feeling of owning several thousand coins instead of a fraction is also, understandably, more satisfactory. But believing that cheaper coins are cheaper in terms of real value is not good for the higher supply coins. And it also stops many promising projects from getting the valuation it might deserve.
The Dash community even discussed the possibility of changing the supply to a much higher number, to lower the price per coin which would make it easier to get first-time investors in on the currency.
If you ever hear the conversation about cheap or expensive coins again, please correct them. Educating is the only way we are going to see mass adoption of cryptocurrencies!
What about learning how to buy that fraction of a bitcoin now? Check out our beginners guide to buying bitcoin and other cryptocurrencies!