Based on the book — When Prophecy Fails by Leon Festinger.

What is Cognitive Dissonance?

“In the field of psychology, cognitive dissonance is the perception of contradictory information and its mental toll. Relevant items of information include a person’s actions, feelings, ideas, beliefs, and values in the environment.”

Ideas and concepts held by all of us, are very difficult to change. Everything from the best food, best movies and best places to live or visit come with strong opinions and an underlying reasoning.

We all base what we believe on something, once we start that journey it becomes harder and harder for anything to possibly change that belief. No matter the arguments, data or even evidence presented directly to us.

We are familiar with the variety of ingenious defenses with which people protect their convictions, managing to keep them unscathed through the most devastating attacks. But man’s resourcefulness goes beyond simply protecting a belief. Suppose an individual believes something with his whole heart; suppose further that he has a commitment to this belief, that he has taken irrevocable actions because of it; finally, suppose that he is presented with evidence, unequivocal and undeniable evidence, that his belief is wrong: what will happen? The individual will frequently emerge, not only unshaken, but even more convinced of the truth of his beliefs than ever before. Indeed, he may even show a new fervor about convincing and converting other people to his view. (pg. 3, When Prophecy Fails)

This is where the concept and idea for money, become linked.

Money and Cognitive Dissonance

• What is money?
• What is inflation?
• What is buying power?
• What is Cryptocurrency?

We learn about these concepts from someone, and take the knowledge with us checked or unchecked into our lives. But what if we have been sold a lie, given wrong information and ultimately have been basing our actions on these beliefs incorrectly? Would any evidence convince you that your understanding of money was wrong?

This is the question we will ask in this article. What do we know about money, saving and our options?

Let’s go through 5 conditions as explored by Leon Festinger in writing the book “When Prophecy Fails”.

1. A belief must be held with deep conviction and it must have some relevance to action, that is, to what the believer does or how he behaves.
2. The person holding the belief must have committed himself to it; that is, for the sake of his belief, he must have taken some important action that is difficult to undo. In general, the more important such actions are, and the more difficult they are to undo, the greater is the individual’s commitment to the belief.
3. The belief must be sufficiently specific and sufficiently concerned with the real world so that events may unequivocally refute the belief.
4. Such undeniable disconfirmatory evidence must occur and must be recognized by the individual holding the belief.
5. The individual believer must have social support. It is unlikely that one isolated believer could withstand the kind of disconfirming evidence we have specified. If, however, the believer is a member of a group of convinced persons who can support one another, we would expect the belief to be maintained and the believers to attempt to proselyte or to persuade nonmembers that the belief is correct.

The first two of these conditions specify the circumstances that will make the belief resistant to change. The third and fourth conditions together, on the other hand, point to factors that would exert powerful pressure on a believer to discard his belief. It is, of course, possible that an individual, even though deeply convinced of a belief, may discard it in the face of unequivocal disconfirmation. We must, therefore, state a fifth condition specifying the circumstances under which the belief will be discarded and those under which it will be maintained with new fervor.

Following these 5 conditions let’s go through what money is and why Bitcoin or USD/ YEN/ GBP is holding up to their status. * USD / YEN / GBP will be referred to as Fiat Currency onward.

The Promise of Fiat Money vs the Promise of Bitcoin

Fiat Promises

• Your ability to live, work, save and barter with anyone accepting the government currency of your country.
• Your right to retirement pensions, healthcare and government taxing to build and maintain your county using the fiat.
• That your government will uphold the value of your Fiat.
• That the government and banks will make decisions to increase the strength of your fiat.
• The banks and governments can decide to print / digitalize more for economic purposes.

Bitcoin Promises

• Scarcity (There will only ever be 21 million Bitcoin).
• Complete control over your Bitcoin transactions.
• The ability to barter / save / exchange 24/7 365 days a year with anyone accepting BTC.
• There is no one person or group in control who can decide to change these rules.
• Global borderless access.
• Rules written in code, transparent, confirmable and open source.

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The Fiat Reality Check

Starting with Fiat currency, lets see if the promises are actually true or, if we are experiencing cognitive dissonance.
Do you believe in your fiat currency strongly?
If the currency was not good, would it impact you greatly?
Would you feel the need to defend it?
Would it impact the world if it failed?
If shown evidence without doubt, would you be able to change your belief? Would others you know, stand with you and fight against the undeniable evidence?

Let’s answer these questions by applying Festinger’s five conditions directly to our traditional financial system.

Conditions one and two are built into our societal DNA. We are born into the fiat system. We trade our most scarce resource — our time — for it, and we make irrevocable commitments based on it. We sign thirty-year mortgages and pay into pension funds for decades, trusting the math will hold up by the time we retire. To abandon the belief in fiat would mean acknowledging that our life’s labor has been stored in a melting ice cube. The psychological toll of this realization is immense.

Condition three demands a specific, refutable belief. The implicit promise of fiat is stability and purchasing power protection. Central banks explicitly target low, stable inflation to preserve this balance.

Condition four introduces the undeniable disconfirmatory evidence. When the money supply is drastically expanded and the cost of housing, food, and energy skyrockets, the evidence is undeniable. The fiat prophecy — that the system will protect your purchasing power — fails in real-time.

Condition five is where the fiat illusion survives. When the prophecy fails, society does not immediately abandon the currency. Supported by a global network of governments, traditional economists, and everyday citizens, the narrative shifts. Inflation is blamed on corporate greed, supply chain issues, or foreign conflicts. The collective social support shields the individual from the painful reality that their money is fundamentally flawed. They emerge more convinced that the system just needs to be managed better, not replaced.

The Bitcoin Counter-Prophecy

Bitcoiners are not immune to cognitive dissonance; in fact, the Bitcoin network relies heavily on the psychological mechanisms Festinger outlined.

For conditions one and two, Bitcoiners hold a deep conviction that fiat is failing and mathematically capped scarcity is the only escape. They take irrevocable action by converting their hard-earned fiat into BTC, running their own nodes, self-custodying their wealth, and often alienating skeptical friends and family in the process.

The specific belief (condition three) is that Bitcoin’s fixed supply will rapidly make it the world’s reserve currency and the ultimate inflation hedge. Yet, believers routinely face massive, undeniable disconfirmatory evidence (condition four): severe price drawdowns, periods where Bitcoin trades like a risk-on tech stock rather than an inflation hedge, and slower-than-expected mainstream merchant adoption.

When the Bitcoin prophecy seems to stall during a brutal bear market, condition five activates. The isolated believer might capitulate, but the deeply connected Bitcoiner turns to the community. On social media, at meetups, and in podcasts, they support one another. They don’t abandon the asset; they double down. They reframe the timeline, emphasize the fundamentals, and evangelize even harder. “Stack sats and HODL” becomes a rallying cry fueled by the exact psychological mechanism that drives groups to rewrite their timelines when a prophecy is tested.

The Collision of Two Belief Systems

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We are living through a massive psychological experiment where two competing financial prophecies are colliding in real-time.

The fiat believer is watching their purchasing power evaporate, yet they cling to the system because the pain of realizing their life savings are being debased is too great. They rely on the sheer scale of societal consensus to keep the illusion alive.

The Bitcoin believer is betting on the math, enduring immense volatility, and leaning on a fiercely dedicated subculture to maintain conviction when the traditional world mocks their digital scarcity.

Ultimately, money is a shared belief. It is a psychological construct before it is an economic one. As the undeniable evidence of fiat debasement continues to mount, the cognitive dissonance will become deafening. The victor will be determined not just by the superiority of the underlying technology, but by which group possesses the psychological fortitude to outlast the other when their respective prophecies are pushed to the brink.

For anyone who has come this far, thanks for reading.

And if you would like to read more about things like this - https://medium.com/@geoffreygardiner