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81. Bitcoin As Veblen Good (Published: 02nd Dec, 2017)
As we have seen the prices of bitcoin go from 1,000 USD to 11,000 USD over the last year, we are coming to see that bitcoin itself is a Veblen good.  The higher the price, the more desireable the product is to the general public.

What is a Veblen Good?
Veblen goods are types of luxury goods for which the quantity demanded increases as the price increases, an apparent contradiction of the law of demand.  Owning a whole bitcoin is now a status symbol.  As there can only be 21 million coins minted (our estimate is that 6 million coins have been lost forever), that puts only about 15 million ever that will be in circulation.

Bitcoins and Lambos
Early bitcoin adopters often compare bitcoins to Lamborghinis.  One of the author’s favorite bitcoin rap is just about that .  At current production rate, there are about 500 times more bitcoin than there are Lambos in the world.  With the cheapest lambo to be had for about 250,000 USD, a simple calculation (250k / 500 ) would yield 500 USD per bitcoin.  The key difference is that you probably need a limited number of lambos.  It's a very hard car to drive actually.  Like fine wine and expensive jewelry, bitcoin is now a luxury item to the affluent Gen Y and Gen Z.  For the ladies, 1 bitcoin is now worth more than a starter Hermes Birkin bag.

Why isn’t bitcoin a Giffen Good?
A Giffen good is a product that people consume more of as the price rises.  We don’t believe that bitcoin is one for the simple reason that there isn’t actually much usage on the network.  Bitcoin still just transacts 7 tranactions per second, compared to over 300,000 transactions per second handled by Alibaba during Singles Day .  Furthermore, there is a now a diversity of tokens out there, if you want to do a payment online, why pay so much and wait 10 minutes a block?

Network Effect
As more and more people buy fractions of bitcoin, there will be sizeable holders base.  Just like when a company enters the S&P 500 index, their shareholder base becomes much more diversified with passive and index trackers, bitcoin holder benefit from each other hoarding these stuff.

Greater Fool Theory
Who cares as long as I am the last one out, right?  Just like the housing crisis of 2008, as long as the party is kicking, don’t turn on the light.  We are only beginning to see the small pipes of institutional money coming into the system.  The rally from 8000 USD to 9000 USD happened on Thanksgiving weekend.  Let the good times roll.

Just a better form of money
We of all things at Cryptomover believe that cryptocurrency is just a better form of accounting/store of value/form of money that most society has in place.  Stable inflation policy, no legacy systems.  May the best technology and more fair monetary policy win.

Is bitcoin the one?
There are many scaling issues and community disagreements over the future of bitcoin.  We at Cryptomover don’t know if bitcoin will be the defacto crypto of choice in the future, or even the near future.  So that is why we designed an index.  Check us out here (www.cryptomover.co)

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