Bitcoin fever is back.
Bitcoin hit a new high in early January, hitting a price of nearly $ 42,000. On Friday morning, the price of the notoriously volatile cryptocurrency was around 32,500, according to CoinDesk.
Even mainstream financial institutions are warming up: JP Morgan said in a January release that Bitcoin price could hit $ 146,000 in the long run if market capitalization gets high enough to compete with gold. (Bitcoin currently has a market value of over $ 600 billion.)
But more than just a cryptocurrency, Bitcoin has become an obsession for many. Here are some of the behavioral and psychological reasons for this.
Bitcoin becomes part of your identity
Bitcoin is “more religion as the solution to every problem, “billionaire Mark Cuban told Forbes in December.
In fact, Bitcoin lovers have their own jargon full of acronyms and phrases from “HODL” to “Whale” and Bitcoin (pre-Covid) conferences would draw thousands of attendees. The crypto crow even has a preferred car that it can buy with its Bitcoin: the Lambo (aka Lamborghini).
“The Bitcoin culture is part of the appeal,” says Finn Breton, professor of science and technology at the University of California Davis and author of “Digital Cash: The Unknown History of the Anarchiists, Utopians, and Technologists Who Create Cryptocurrency.”
“When you buy bitcoin, you are actually buying into a whole scene,” says Breton. “And it’s a scene that can be part of your identity.”
Although bitcoin is getting more attention from some serious investors and mainstream financial institutions, it’s still a somewhat subversive concept, so people who invest in bitcoin can see themselves as radical or partakers of the counterculture, says Breton.
Social media plays a role here
From celebrities investing in Bitcoin to a highly engaged Bitcoin community on Twitter, TikTok and Reddit, social media is contributing to Bitcoin’s popularity.
“Suddenly there’s a new way to see yourself as an actor, finance yourself, and have an identity like in the finance room,” says Lana Swartz, assistant professor of media studies at the University of Virginia and author of “New Money: How Payment Social Media.” “says CNBC Make It.
These social platforms can also influence behavior, according to Utpal Dholakia, a professor of marketing at Rice University who studies consumer financial decision making. Research has shown that people who talk about their investments in online social environments tend to become more risk-averse about the types of investments they make, he tells CNBC Make It.
“The same dynamic applies to many of the investment decisions that are being made,” says Dholakia.
The volatility can be exciting
Many shrewd investors, from Kevin O’Leary to CNBC’s Jim Cramer, have compared buying Bitcoin to heading to Vegas. Warren Buffett, CEO and Chairman of Berkshire Hathaway, is a longtime critic of Bitcoin, saying that “cryptocurrencies are fundamentally of no value” and are “a gaming device.”
And as with gambling, “some people certainly enjoy this thrill,” says Dholakia.
Regularly checking the stock price can get boring, says Tom Meyvis, professor of marketing at New York University’s Leonard N. Stern School of Business. “It’s exciting with something like Bitcoin because something happens all the time,” he says. “You can check it 10 times a day and the price can vary a lot.”
In addition, many young people who grew up playing video games and social media, in particular, are conditioned to want instant gratification and fast cycles, says Swartz. Being attracted to high-risk and rewarding investments like Bitcoin “makes perfect sense,” she says.
People are excited about the prospect of bringing a new, potentially life-changing technology to the world. And with bitcoin bulls predicting the price of crypto could soar as high as $ 200,000 in the next decade, and with mainstream financial firms from Paypal to Square moving into bitcoin, it’s hard not to be afraid to miss.
Then there are the viral stories about people who were successful with Bitcoin: there are enviable strokes of luck, from instant Bitcoin millionaires to stories like the “Bitcoin Family”, a Dutch family of five who bought their fortune in 2017 in exchange for Bitcoin (as Bitcoin was $ 900), got into a van and traveled the world.
“People focus more on the positive than the negative,” says Meyvis. So it’s easy to get swept up in the possibilities Bitcoin could offer.
It gives hope
“Money is a technology with which we can imagine the future,” says Swartz.
The Bitcoin fuss, especially among young people, shows that people “feel excluded from the possibility of having the kind of assets that could make them any form of wealth,” says Breton. Millennials born between 1981 and 1996 controlled just 4.6% of US wealth in the first half of 2020, according to the Federal Reserve.
“When we look at the Bitcoin fever, we really have to see it in part as evidence that this is happening because there are no reliable, non-speculative mechanisms that people who do not yet have access to a chunk of wealth could use to do Creating wealth over time, “he says.” And that’s a real indictment of the way things are currently set up for younger people. “
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