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The Veblen Effect, named after economist Thorstein Veblen, describes a situation where 𝘁𝗵𝗲 𝗱𝗲𝗺𝗮𝗻𝗱 𝗳𝗼𝗿 𝗮 𝗴𝗼𝗼𝗱 𝗶𝗻𝗰𝗿𝗲𝗮𝘀𝗲𝘀 𝗮𝘀 𝗮 𝗿𝗲𝘀𝘂𝗹𝘁 𝗼𝗳 𝗶𝘁𝘀 𝗽𝗿𝗶𝗰𝗲 𝗴𝗼𝗶𝗻𝗴 𝘂𝗽, contrary to the typical law of demand in economics. This phenomenon is usually due to the perceived exclusivity and status symbol associated with higher-priced goods. In the context of #Bitcoin and Austrian economics, the Veblen Effect can be interpreted in a few ways.

𝗕𝗶𝘁𝗰𝗼𝗶𝗻 𝗾𝘂𝗮𝗹𝗶𝗳𝗶𝗲𝘀 𝗮𝘀 𝗮 𝗩𝗲𝗯𝗹𝗲𝗻 𝗴𝗼𝗼𝗱. As its price increases, Bitcoin gains more media attention, and new buyers become afraid that they’ll miss out on its price appreciation (otherwise known as FOMO, or Fear Of Missing Out), which leads to even higher prices and additional attention. However, this interpretation is superficial, and overlooks Bitcoin’s fundamental value proposition of being 𝗱𝗲𝗰𝗲𝗻𝘁𝗿𝗮𝗹𝗶𝘇𝗲𝗱, 𝘀𝗰𝗮𝗿𝗰𝗲, 𝗰𝗲𝗻𝘀𝗼𝗿𝘀𝗵𝗶𝗽 𝗿𝗲𝘀𝗶𝘀𝘁𝗮𝗻𝘁, 𝗮𝗻𝗱 𝘂𝗻𝗰𝗼𝗻𝗳𝗶𝘀𝗰𝗮𝘁𝗮𝗯𝗹𝗲 𝗱𝗶𝗴𝗶𝘁𝗮𝗹 𝗺𝗼𝗻𝗲𝘆.

The Veblen Effect not being "priced in" is a result of the market still grappling with understanding and valuing Bitcoin’s intrinsic properties. The market is learning to appreciate Bitcoin's many desirable qualities, which are 𝘧𝘢𝘳 𝘮𝘰𝘳𝘦 𝘴𝘶𝘴𝘵𝘢𝘪𝘯𝘢𝘣𝘭𝘦 𝘥𝘳𝘪𝘷𝘦𝘳𝘴 𝘰𝘧 𝘷𝘢𝘭𝘶𝘦 than mere popularity and FOMO.

Moreover, Austrian economics would argue that trying to "price in" such psychological and speculative factors like the Veblen Effect runs contrary to the principles of sound economic theory, which focuses on 𝘁𝗵𝗲 𝗳𝘂𝗻𝗱𝗮𝗺𝗲𝗻𝘁𝗮𝗹 𝘂𝗻𝗱𝗲𝗿𝗹𝘆𝗶𝗻𝗴 𝘂𝘁𝗶𝗹𝗶𝘁𝘆 𝘁𝗵𝗮𝘁 𝗮𝗻 𝗮𝘀𝘀𝗲𝘁 𝗴𝗶𝘃𝗲𝘀 𝘁𝗼 𝗶𝘁𝘀 𝘂𝘀𝗲𝗿𝘀. Bitcoin's value and price should, ideally, reflect its 𝘶𝘵𝘪𝘭𝘪𝘵𝘺 𝘢𝘯𝘥 𝘦𝘴𝘵𝘢𝘣𝘭𝘪𝘴𝘩𝘦𝘥 𝘯𝘦𝘵𝘸𝘰𝘳𝘬 𝘦𝘧𝘧𝘦𝘤𝘵, rather than transient and often irrational short-term speculations.

While Bitcoin is valued for its fundamental properties by a very small minority, most people still don’t value it at all, and those who do, tend to out of pure speculation. And even those who see Bitcoin for what it truly is are finding 𝘮𝘰𝘳𝘦 𝘳𝘦𝘢𝘴𝘰𝘯𝘴 𝘵𝘰 𝘷𝘢𝘭𝘶𝘦 𝘪𝘵 𝘦𝘷𝘦𝘯 𝘩𝘪𝘨𝘩𝘦𝘳 𝘦𝘷𝘦𝘳𝘺 𝘥𝘢𝘺. In both the short and long-term, Bitcoin is a Veblen good, and this fact — by definition — can never be fully priced in.

What do you think? Is Bitcoin’s Veblen effect priced in? Do you think it ever can be?

Tell me in the 𝗖𝗼𝗺𝗺𝗲𝗻𝘁𝘀⬇️

Give this a 𝗟𝗶𝗸𝗲🤙 and a 𝗦𝗵𝗮𝗿𝗲🔄, so others can understand that Bitcoin is a Veblen good, what that means, and why it’s not priced in.