Topic: [2018-01-12] Is Bitcoin’s Value Due to Social Status it Brings? (Read 103 times)

That's... new to me. It's only very recently that Bitcoin brings what can be deemed as a positive social status. Up until last year, the mainstream and the uninitiated viewed Bitcoin users at best as computer nerds, at worst shady people who likely use drugs and watch porn all day. I say this not because of what I read, but because of my own experience. Even today, most of my network - mostly educated, mostly technologically knowledgeable - still view Bitcoin the way traditional finance people do - as a dangerous fad.

And if being a Veblen good will drive up value, shouldn't the price now be even higher now that people imagine you to be wealthy thanks to Bitcoin?

Snob value does exist to a certain extent online, though. Just see reddit. Or here.

I agree there is a similiarity between the "Dot.Com" era of the 1990's (I was there!) and the current CryptoCurrency craze that is occuring.  I believe though, this more mainstream because not just any average Joe could participate in the Dot.com  era, that is not the case with Crypto.    This seems more like the Roaring 20's in the United States but its not being completely fueled by inflationary central bank policies.

Again, the current problem with Bitcoin are the transaction fees being so high and that is making it impractical for ordinary, daily use as first imagined by Satoshi.

Well that would be stereotyping. I do not believe it follows that when you have invested onto something that earned so much, it automatically says you are a good investor because you make good money. Perhaps, it depends. Sometimes you just get lucky. Equally, it does not follow that you are affluent just because you have joined today's bandwagon. You know, time is very telling when it comes to investments. The value of your investments may grow or falter with time. Hence, you can never be too sure about where you are heading.

Really! How could Bitcoin be considered Veblon Good when it has no real intrinsic value? I don't think myself richer than Mr. X if I have 5 BTC (let 1 BTC = $15K) and Mr. X has $75K in Paper Money.

The main reason why its price is surging is that the demand of Bitcoin has crossed its supply in market and as a result buyers are trying to increase buy price in order to acquire BTC. The reason of demand surge can once again co-related to expectation of investors to get more returns in future. This point is clearly explained in article here:


Then where is Social Status playing any role? 

That's pretty ridiculous.


The real value is in Bitcoin's various security attributes:

• Supply cannot be arbitrarily inflated (fixed inflation schedule)
• BTC cannot be arbitrarily seized or ownership altered (owner's consent required)
• Taking control of the overall Bitcoin system is difficult, and becomes increasingly difficult as it grows (decentralised network)

These qualities make Bitcoin very useful as a form of money. If some people adopt a superiority complex, it is a consequence of how secure their money is, i.e. a secondary effect.

Is Bitcoin’s Value Due to Social Status it Brings?



It makes perfect sense to want to own something that is has increased in value 13-fold in the last year, but is part of Bitcoin’s value due to the social status it brings?

A study conducted by Bernstein Research has recently suggested just that. The analysts agree that limited supply plays a big role in the price surge, but the social standing that comes with owning Bitcoin may also be causing investors to join the hype:

    “Bitcoins do not provide investors with cash-flows or other benefits, but the maximum supply of Bitcoins is fixed and so the price is driven by speculation on the potential demand for Bitcoin.”


A Veblen good

Just like high-end liquor, fancy cars and fashion brands, Bitcoin is acting like a Veblen good. The higher prices for certain goods can be attributed to the reinforcement of the social status attached to the product, something Bernstein calls “snob value.” The analysis added:

    “In mid-2017, we conducted a consumer survey of 1,070 Chinese Premium Goods Consumers which showed that Veblen Demand is the third most important motivator of brand choice in brands.”



Demand Curve of a Veblen Good

Bitcoin is perceived as difficult to understand for those who aren’t “in the know.” Thus, owning Bitcoin immediately gives one that “snob value,” implying greater intelligence or insight.


Just like medicine...

In a strange, yet practical comparison, Bernstein compares Bitcoin to E.Jiao - traditional Chinese medicine derived from donkey skin. In 2016, China produced 5,000 tons of E.Jiao, which required 2.5 mln donkey skins. This has lead to a scarcity of donkey skins and cheap imitations coming to the market.

The original product’s leading manufacturer - Dong E-E.Jiao - has been able to raise the price of its product 18 times over the last decade because of the Veblen good-quality that has become attached to it with its scarcity.


Dot-com hype?

While not necessarily a good, in the early 90s, with the dot-com boom, there was a certain social standing that came with being involved in a technology company. People were caught up in the hype partially because they wanted to be part of the early elite that were making waves in technology.

It has already been seen that companies that simply add Blockchain to their name get huge waves of unjustified interest, and again, this could be likened to the social status that comes with being part of a company that is in the cryptocurrency space.

Source: https://cointelegraph.com/news/is-bitcoins-value-due-to-social-status-it-brings