Bitcoin fever is back.
Even mainstream financial institutions are warming up: JP Morgan said, in the long-term, if the market cap gets high enough that it competes with gold, the price of bitcoin could reach $146,000, in a note published in January. (Bitcoin currently has a market value of over $600 billion.)
But more than just a cryptocurrency investment, bitcoin has become an obsession for many. Here are some of the behavioral and psychological reasons why.
Bitcoin 2021 becomes part of your identity
Bitcoin is ″more religion than solution to any problem,” billionaire Mark Cuban told Forbes in December.
In fact, bitcoin aficionados have their own jargon full of acronyms and phrases from “HODL” to “whale,” and (pre-Covid) bitcoin conferences would attract thousands of attendees. The crypto crow even has a preferred car to buy with their 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 Davis and author of “Digital Cash: The Unknown History of the Anarchists, Utopians, and Technologists Who Created Cryptocurrency.”
“When you buy bitcoin, you’re actually buying into a whole scene,” Breton says. “And it’s a scene that can be a part of your identity.”
Though 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 it can view themselves as radical or participating in the counterculture, Breton says.
Social media plays into it
From celebrities who invest in bitcoin to a highly-engaged bitcoin community on Twitter, TikTok, and Reddit, social media feeds into bitcoin’s popularity.
“Suddenly, there’s like a new way to see, finance and to have an identity of yourself as an actor in like the financial space,” says Lana Swartz, assistant professor of media studies at the University of Virginia and author of “New Money: How Payment Became Social Media,” tells CNBC Make It.
These social platforms can also drive behaviors, according to Utpal Dholakia professor of marketing at Rice University, who studies consumer financial decision-making. Research has shown that when people talk about their investments in online social environments, they tend to become more risk-seeking in the types of investments they make, he tells CNBC Make It.
“The same dynamic applies to a lot of investment decisions which are being made right now,” Dholakia says.