The Sunk Cost Trap

Not all holding is the same.

Some people hold Bitcoin because they have a clear thesis about its long-term value, have genuinely prepared for volatility, and are comfortable watching the price move without it driving their decisions. That’s conviction.

Some people hold Bitcoin because they bought at a high price and can’t psychologically accept selling at a loss. The holding isn’t a choice — it’s a refusal to realise a loss. That’s the sunk cost trap.

The distinction matters because the behaviours that come from each position are completely different.

Conviction holders add during dips. They’re calm during bear markets because the falling price aligns with their expectation. They have a thesis they can articulate that doesn’t depend on the current price.

Sunk cost holders desperately watch for the price to return to their entry level so they can “get out even.” They don’t have a thesis — they have a number they’re anchored to. They’re not holding Bitcoin; they’re waiting to escape.

The sunk cost trap is painful because it often means spending the most uncomfortable period of a bear market in a position that produces nothing but anxiety. And it frequently ends in one of two outcomes: selling near the bottom when the pain becomes intolerable, or holding through the recovery for the wrong reasons and then selling too early because the goal was always just to break even.

The question worth sitting with: is the position held because of what Bitcoin is, or because of the price paid for it? One of those is a thesis. The other is a trap.

Tomorrow: conviction vs stubbornness — how to tell the difference.

— The Daily Bit