NFTs: the psychology behind buying digital assets

Lately we’ve been busy with various DIY projects. What we have in mind is to buy a few NFTs and use a Raspberry Pi to build a wall full of NFTs (maybe at some point we’ll write a step-by-step tutorial on it).

So we went to opensea.io to look for an affordable, beautiful piece of art to buy and kick off our little project.

As we browsed through various artworks, we remembered CryptoPunks, Beeple and BAYC, and two questions immediately came to mind:

1. Who managed to pay so much money for these
2. What do they do for a living that lets them pay for something like that

So we’re writing this short article to answer our own question: why do people spend significant sums of money on a .jpeg, and what psychological mechanisms lie behind such purchases?

Veblen goods

The term “Veblen” comes from the American economist Thorstein Veblen, who introduced it in his 1899 book “The Theory of the Leisure Class.” The term is used to describe products and goods whose demand rises when their price rises and falls when their price falls, contrary to the basic economic law of supply and demand. Why? Because these products are seen as a sign of luxury, exclusivity and social recognition. Owning such a product isn’t only about its usefulness, but also about the social prestige it gives its owner.

NFTs are digital products in the tradition of Veblen goods. It’s also interesting that many NFTs display the characteristics of Veblen goods:

Status symbol

NFTs, especially those that are rare or tied to well-known artists, act as a digital status symbol. The higher the NFT’s value, the bigger the digital flex.

NFT exclusivity

Owning a specific NFT doesn’t just mean owning a digital asset; it also means exclusive ownership of a piece of digital reality that others can’t have. This exclusivity can also be seen in the world of Veblen goods, where, for example, owning a rare luxury car model sets its owner apart from everyone who doesn’t have one.

The price is a feature, not a bug

Just as some luxury goods become more desirable because of their high price, buying an NFT is a display of financial power.

Continuing our analysis, there are a few points worth highlighting:

Emotional premium

Many people buy NFTs because they feel a strong emotional connection to the item or its creator. An NFT can be the work of a favorite artist, a moment featuring a beloved celebrity or even a virtual pet. The emotional element can push an NFT’s value far above its objective worth.

FOMO (Fear of missing out)

We all know what FOMO is, and we’ve surely all experienced it. The same goes for NFTs. Although the NFT market is more volatile, the potential for big gains attracts many people.
For those of you working on NFT projects, here are a few tips to help you succeed:

Positioning

If you’re targeting a golden-boy audience, don’t be afraid to price your NFTs at a deluxe level. As we said, the more expensive a good is, the more desirable it becomes.

The story über alles

The story behind the work matters more than the work itself. Selling a portrait of Trump is one thing, but a “Trump Card” has a different value (we’re thinking of buying one for our own project).

Limited pieces

Scarcity can strengthen the perception of exclusivity. Consider issuing your NFTs in limited editions or series to strengthen their Veblen characteristics.

Conclusion

Bringing Veblen’s theory to NFTs offers a different perspective. As the lines between the digital and physical worlds begin to blur, the principles that drive luxury and status in our material world are finding new expressions in virtual space. Understanding these principles can be a game changer for those of you who want to stay ahead in the evolving NFT landscape.