Cracking the NFT Code: The Psychology Behind Buying Digital Assets

Let’s discuss why people spend significant sums of money on NFTs. What's the psychology behind it? Especially if we’re talking not only about the cases when it was done only for speculation.

Veblen Goods and NFTs

What are Veblen Goods?

Named after American economist Thorstein Veblen, Veblen goods defy the basic law of demand in economics. Typically, as the price of a product increases, demand should decrease. But for Veblen goods, as the price rises, so does the demand. Why? Because these goods are seen as a display of luxury, exclusivity, and status. Owning such a product isn't just about its utility but the social prestige it confers upon its owner.

NFTs: The Digital Veblen Goods

Connecting the dots, it's clear that many NFTs exhibit characteristics of Veblen goods:

1. Status Symbol: NFTs, especially those that are rare or linked to well-known artists or celebrities, act as a digital badge of honor. The higher the price one pays for an NFT, the more it may be perceived as a testament to their wealth and status in digital communities.

2. Exclusivity: By their nature, NFTs are unique or limited in number. Owning a particular NFT signals not just possession of a digital asset but exclusive ownership of a piece of the digital realm that others can't have. This exclusivity can be seen parallelly in the world of Veblen goods, where, for instance, owning a rare luxury car model sets one apart from the rest.

3. Price as a Feature, not a Bug: Just as some luxury goods gain allure from their sheer unaffordability, certain NFTs become more desirable because of their high price. In some circles, the act of purchasing a high-priced NFT is a performative display of economic power.

Also, there’re some more things I want to mention talking about the psychology behind buying and selling NFTs.

4. Emotional Connection

   
   

Many people buy NFTs because they feel a strong emotional connection to the item or its creator. This could be art from a favorite artist, a moment from a beloved celebrity, or even a virtual pet. The emotional aspect can drive up the perceived value of an NFT well beyond its objective worth.

5. FOMO

   
   

With stories circulating about people making substantial returns from their NFT purchases, the FOMO (Fear Of Missing Out) factor kicks in. While the NFT market is certainly more volatile and speculative, the potential for high returns appeals to many.

Please keep all these factors when you create your NFT project or want to buy one as a collector. As you may know, I work with NFT and crypto projects, so based on this material, there is some advice for such projects.

Implications for NFT Sellers

For those venturing into the NFT marketplace, understanding the Veblen goods dynamic can be vital:

1. Positioning: If you're targeting a high-end audience, don't shy away from pricing your NFTs at a premium. The very act of pricing them high might make them more desirable to a certain clientele.

2. Storytelling is Key: The narrative behind an NFT can enhance its Veblen good nature. If an NFT represents a historical moment, an iconic figure, or a groundbreaking piece of art, its prestige value goes up.

   
   

3. Engage in Limited Releases: Scarcity can boost the perception of exclusivity. Consider releasing NFTs in limited editions or series to enhance their Veblen characteristics.

4. Add utility to your project. I’ve spoken about this aspect in this article.

In Conclusion

The intersection of Veblen goods theory and NFTs offers a fresh perspective on the allure of digital assets. As the lines between the digital and physical worlds continue to blur, the principles that drive luxury and status in our tangible world find new expressions in the virtual space. Understanding these principles can be a game-changer for those navigating the evolving NFT landscape.

If you are interested in learning how to promote NFT/Web3/Crypto projects and how to add value to them, drop me a line!

P.S. Check out my previous articles at HackerNoon:

• NFT Marketing Guide - The Most Complete and Detailed Playbook 2023
• Nobody Buys an NFT Just for Art
• Why Web3 and NFT Gaming Can Be the Biggest Trend of 2023
• FTX Raised $1bn With This Pitch Deck in 2021. Let’s Review It!
• Marketing was Key to Moonbirds Becoming a Super Successful NFT
• Understanding DAO: A Basic Explanation