Why people are so obsessed with bitcoin: cryptocurrency psychology explained
The Bitcoin fever is back.
Bitcoin hit a new high in early January, reaching a price of nearly $ 42,000. As of Friday morning, the notoriously volatile cryptocurrency’s price was roughly 32,500, according to CoinDesk.
Even major financial institutions are heating up: JP Morgan said that in the long term, if the market capitalization is high enough to compete with gold, the price of bitcoin could hit $ 146,000, in a note published in January. (Bitcoin currently has a market value of over $ 600 billion.)
But more than just a cryptocurrency, bitcoin has become an obsession for many. These are some of the behavioral and psychological reasons why.
Bitcoin becomes part of your identity
Bitcoin is more religion than a solution to any problem, billionaire Mark Cuban told Forbes in December.PAY SLIK.
In fact, bitcoin fans have their own jargon full of acronyms and phrases from HODL to whale, and bitcoin (pre-Covid) conferences would attract thousands of attendees. The crypto raven even has a preferred car to buy with his bitcoin: the Lambo (aka Lamborghini).
The culture around bitcoin is part of the appeal, says Finn Breton, professor of science and technology at the University of California at Davis and author of Digital Money: The Unknown Story of the Anarchists, Utopians, and Technologists Who Created Cryptocurrency.
When you buy bitcoins, you are actually buying an entire scene, says Breton. And it is a scene that can be part of your identity.
Although bitcoin is receiving more attention from some serious investors and major financial institutions, it is still a somewhat subversive concept, so people who invest in it may see themselves as radicals or participate in the counterculture, says Breton.
Social networks play with that
From celebrities investing in bitcoins to a highly engaged bitcoin community on Twitter, TikTok, and Reddit, social media fuels the popularity of bitcoins.
Suddenly, there is a new way of looking at, financing, and having an identity of yourself as an actor in the financial space, says Lana Swartz, assistant professor of media studies at the University of Virginia and author of New Money: How the payment became social media, he tells CNBC Make It.
These social platforms can also drive behaviors, according to Utpal Dholakia marketing professor at Rice University, who studies consumers’ financial decision-making. Research has shown that when people talk about their investments in social settings online, they tend to look for more risk in the types of investments they make, he tells CNBC Make It. PAY SLIK.
The same dynamic applies to a lot of investment decisions that are being made right now,
Volatility can be exciting
Many smart investors, from Kevin O’Leary to CNBC’s Jim Cramer, have compared buying bitcoin to going to Las Vegas. Berkshire Hathaway CEO and President Warren Buffett have long been critic of Bitcoin, saying that cryptocurrencies are basically useless and are a gaming device.
And as with gambling, some people certainly enjoy that excitement, says Dholakia.
Checking the stock price regularly is an activity that could get boring, says Tom Meyvis, a marketing professor at New York University’s Leonard N. Stern School of Business. With something like bitcoin, it’s exciting because something is constantly happening, You can check it 10 times a day and the price can vary wildly.
Also, many young people especially, those who have grown up with video games and social media, are conditioned to want instant gratification and fast cycles. Being attracted to high-risk, high-reward investments like bitcoin makes a lot of sense.
People are excited about the prospect of bringing new and potentially transformative technology to the world. And with bitcoin bulls predicting that the price of cryptocurrencies could climb as high as $ 200,000 over the next decade, and with major finance companies from Paypal to Square getting into bitcoin, it’s hard not to fear missing out.
Add to that the viral stories about people who have been successful with bitcoin — there are enviable windfalls, from instant bitcoin millionaires to stories like the ‘Bitcoin Family’, a Dutch family of five that liquidated their assets in 2017 in exchange for bitcoin ( when bitcoin was priced at $ 900), he moved into a van and traveled the world.
People focus more on the pros than the cons. So it’s easy to get carried away with the possibilities that could arise from bitcoin. PAY SLIK.
Money is a technology that allows us to imagine futures
The enthusiasm for bitcoin, particularly among young people, illustrates that people feel excluded from the ability to have the kind of assets that would allow them to generate any form of wealth, says Breton. Millennials, those born between 1981 and 1996, controlled just 4.6% of America’s wealth during the first half of 2020, according to data from the Federal Reserve.
When we look at the rush around bitcoin, we really need to see it in part as a demonstration of the fact that this is happening because there are no reliable, non-speculative mechanisms by which people who don’t yet have access to a large chunk of wealth it could produce wealth over time, And that’s a real indictment of the way things are currently set up for the youngest. PAY SLIK.