Opinion Cryptocurrencies as a Luxury Digital Good

Cryptocurrencies as a Luxury Digital Good

May 7, 2022

Crypto tokens, especially those involved in the process of yield farming, flexible savings, or any similar program are all included in a simple system. That system has the objective of taking tokens and running them into more tokens. Of course, the actual mechanics of that can be vastly different and come with alternatives, like future returns through airdrops or generation of entrances into a shared ledger, as is the case with ETH 2.0. However, in all of those cases, the process remains the same – users take tokens and place them in a box. From that box, new tokens come out through some mechanisms of action. Most importantly of all, anyone can make their own box and use it as they see fit – they can leave the same tokens or take out the profits. 

In any case, the box keeps making tokens and with that, money as well. Naturally, it goes without saying the crypto tokens and the entire crypto field are much more than an empty box that prints money. Their blockchain basis is a technology that can rewrite how the most fundamental economic principles are applied and enforced, all through a completely decentralized and self-sustainable system. But, this still presents a clear idea that cryptocurrencies are a means of making money. They offer this potential to those who have the most of them and this makes them into a form of a luxury good. This idea has some important repercussions for the entire cryptosphere and the way it can continue to develop in the future.

Varied Uses

The concept of cryptocurrencies like bitcoin being a luxury good is not something that comes intuitively to many individuals or even institutions. Crypto Media is often saturated with stories about the use of crypto in a wide range of different situations. That is why those who support cryptocurrencies are quick to point out a long analysis of the processes in the developing world where the use of BTC is making a huge change in the everyday life of ordinary people. 

The entire process of adoption of bitcoin in El Salvador shows an example of such a narrative in action across the entire sovereign state, but also the echoes of the same idea across the social media and many other locations where crypto enthusiasts converge. Other stories show that cryptocurrencies are very useful for supporting dissidents stuck inside of political upheaval or inside of unstable security situations. Lastly, the use of crypto for specialized charities is also helping millions across the world. However, all of these pale in comparison to the known cases of individuals and organizations using crypto for either self-promotion or enrichment. 

Luxury Item

Gucci might not be the first big company to jump on the crypto wagon, but it is officially on it as of recently. The famous Italian brand announced that in certain US stores that it runs, bitcoin and other selected cryptocurrencies will be an accepted means of payment. It is not alone in this process of acceptance – other huge brands decided to do the same in recent months. Most of them, like Gucci, have little or nothing to do with tech-heavy domains like esports gaming, social media, or anything like that. 

That includes brands that are extremely luxurious and likely not familiar to many regular consumers. Watches like Franck Muller, Hublot, and Norway are all now accepting digital currencies for their products, which often reach many thousands of USD. Other brands like Hennessy and Louis Vuitton are using blockchain for some manner of authentication of their products. 

Price Rise

One of the characteristics of luxury goods is also the fact that they become more sought after once they begin to rise in value. The same happens to their balance of supply and demand. That comes from the notion of perceived value and the concept, often referred to as Veblen goods, is a perfect fit for the cryptosphere. It also echoes the notion that these goods come with a sense of status and the ability of the owners to somehow brag about the fact that they have these. 

Also, the process of purchase is also likely somehow different and special, no matter if it takes place in luxurious boutiques or in digital exchanges that many others do not even know exist. It is easy to see the influence on the prices of crypto coming from these notions. Of course, the process behind the price of a BTC token for example is not that straightforward and simple, as there are numerous market and psychological factors that make a difference, but the first concept also applies as well. Yet, when BTC was at its highest and breaking all-time records, there were more buyers than there are now when the same cryptocurrency is nearly 50 percent cheaper. 

Modern Luxury Goods

A big problem in understanding the concept of luxury goods in the present world is the fact that it changes so quickly. In the era of postindustrial and postmodern global society, almost anything can become a trending topic and thus a sought-after commodity. In the previous centuries, luxury was mainly about brand lineage and general craftsmanship that goes into a product. Swiss watches are again an excellent example, as they offer decades of a strong presence in these niche markets. But today, these factors are made irrelevant through the digital backgrounds of many goods. 

Instead of a lineage, which cannot be longer than a few years at best, the buyers are looking for signals of future aspiration and present strong identity. Furthermore, big global changes like the COVID-19 pandemic or the Russian invasion of Ukraine give away this sense that old systems are not as stable and durable as they once appeared. That is why so many are ready to reevaluate how they perceive and support valuable goods. Because of that, many are ready to get their own crypto box and see what money it can make for them. If there are notions of luxury assigned to that, the deal is only a bit sweeter.