What Marketers Can Learn from the Rise of Bitcoin
Exploring the psychological principles behind what made bitcoin ‘stick’ around the world.
Ever wonder what triggered the wave of bitcoin popularity over the past decade that has led to global awareness of cryptocurrencies? For a new product with no marketing budget, how did bitcoin become ‘sticky’?
Since launching in 2009 by mysterious founder Satoshi Nakamoto, it is estimated that there are now more than 7.1 million unique active users with a bitcoin wallet. Bitcoin rose stratospherically in value from 2011 to 2017, from $0.30 to over $19,000 per coin, and some experts even predicted that the value would rise to as high as $1MM each by 2037.
Today tells a different story, with the value of each coin having dropped to around $5,000. But a recent surge in cryptocurrency prices this week had me wondering, what may be some of the less obvious reasons for why this polarizing currency continues to have staying power with millions of loyal fans?
We can turn to the psychological laws of influence and contagiousness for answers. By leveraging the learnings from Dr. Robert Cialdini’s classic, Influence: The Laws of Persuasion, and Dr. Jonah Berger’s seminal book, Contagious: Why Things Catch On, we can apply the rules of persuasion and virality to understand how bitcoin spread — without spending a dime on traditional marketing.
Six laws in particular apply directly to the story of bitcoin’s popularity. For marketers, the application of these psychological laws of influence and spread to bitcoin may hopefully help you to grow your own product or service’s adoption as well.
1. Law of Scarcity
In the book Influence, Professor Robert Cialdini shares one of the essential laws of influence: scarcity. “As a rule, if it is rare or becoming rare, it is more valuable.” This works wonderfully for bitcoin because, inherently, there is a finite supply.
Similar to gold, bitcoin cannot be created; once all available 21 million bitcoins are mined, there will be be none left. The fixed supply of bitcoin’s currency makes it scarce by nature, thus increasing its desirability.
As Dr. Cialdini shares, “When increasing scarcity interferes with our prior access to some item, we will react against the interference by wanting and trying to possess the item more than before.” In this sense, bitcoin is not unlike many rare collectibles, like baseball cards and Beanie Babies; the more people buy it, and the more scarce the coins become, the more it is in demand.
2. Social Proof
The word-of-mouth surrounding bitcoin has made it amenable to another one of Dr. Cialdini’s laws of influence: the principle social proof. “It states that one way we use to determine what is correct is to find out what other people think is correct. […] Usually, when a lot of people are doing something, it is the right thing to do.” This principle is even more powerful when we observe the behavior of people we think are similar to us.
Case in point: the global tech community. It makes sense that the biggest fans of bitcoin are technologists. And given the similarity of interests of those within the tech community, it also makes sense that they may look to each other as the social proof needed to help justify an uncertain investment in digital currency.
As Dr. Cialdini writes, “Without question, when people are uncertain, they are more likely to use others’ actions to decide how themselves should act.” In this case we see that the great uncertainty surrounding the future value of bitcoin actually further encourages people to use social proof to make their decision to buy.
3. Authority
Similar to social proof, the principle of authority can also help explain the rise of bitcoin’s popularity. Dr. Cialdini shares, “Once we realize that obedience to authority is mostly rewarding, it is easy to allow ourselves the convenience of automatic obedience. […] We don’t have to think; therefore we don’t.”
It is hard to deny the subject-matter authority of some of bitcoin’s biggest supporters, including Elon Musk, Mark Cuban, Richard Branson, and Marc Andreesen. As some of the wealthiest tech giants in the world, their opinions on bitcoin may be powerful enough to influence others to buy the currency. Our decision to buy becomes easier when we see respected authority figures making the same decision.
“We allow ourselves to be much more swayed by experts who seem to be impartial than by those who have something to gain by convincing us,” writes Dr. Cialdini. In this case, it’s possible that the existing wealth of authority figures also makes the ordinary bitcoin buyer trust the source of information even more.
4. Social Currency
Bitcoin is remarkable by nature. As the very first decentralized digital currency with no central bank, a mysterious creator, and hoards of supposed ‘bitcoin millionaires’, there is tons to remark on and get excited by when it comes to cryptocurrency. This works very well with one of Dr. Jonah Berger’s principles of contagiousness: social currency.
According to Dr. Berger in his book, Contagious, “Remarkable things provide social currency because they make the people who talk about them seem, well, more remarkable. […] Not surprisingly, then, remarkable things get brought up more often.” Within the global bitcoin community, which can be observed abundantly on Youtube (here’s an example), there is a palpable cache with being someone who is knowledgeable about bitcoin and able to correctly predict future fluctuations. As the currency gained in value and prominence, it made sense that bitcoin became regularly covered by business and tech media outlets like CNBC and Bloomberg worldwide.
“Scarcity and exclusivity boost word of mouth by making people feel like insiders. If people get something not everyone has, it makes them feel special, unique, high status. […] Having insider knowledge is social currency,” writes Dr. Berger. Though the term ‘bitcoin’ today may be more familiar worldwide, only an estimated 5% of Americans hold bitcoin. While its adoption still remains exclusive, we can reasonably expect Bitcoin to continue to hold value — at the very least as social currency.
5. Practical Value
“People share practically valuable information to help others,” writes Dr. Berger. Practically speaking, investing in bitcoin may actually be a very good decision. To many supporters, bitcoin represents a fantastic method of diversifying your investment portfolio, minimizing the negative impact of inflation, and protecting your money in general from ever being seized.
People sharing the practical value benefits of bitcoin with friends and family is one of the many ways the product became contagious. Understandably, discussing how bitcoin has the potential to make individuals’ lots of money in a short amount of time is a compelling reason to share. And the greater the potential monetary upside, the better.
Dr. Berger shares that: “Promotional offers that seem surprising or surpass expectations are more likely to be shared. This can be because the actual deal itself exceeds expectations, or because the way the deal is framed makes it seem that way.” Whether or not bitcoin actually delivers on the practical value is still yet to be determined, but in the meantime, the perceived value is enough to help spread the word.
6. Stories
The final contagiousness principle related to bitcoin: stories. As Dr. Berger explains, “You can think of stories as providing proof by analogy. […] The mere fact that it happened to someone who is like me makes me feel that there is a pretty good chance it will happen to me too.” When the general public hears that that the Winklevoss twins have become among the first ‘bitcoin billionaires’, or that 50 Cent ‘accidentally made $8 million in bitcoin’, it’s hard to deny that there is a chance cryptocurrency could make you rich.
The bitcoin story around wealth-creation is strong, but what’s even stronger is the product’s origin story around revolutionizing money itself. With a secret founder included (not unlike superheroes with mysterious origin stories), bitcoin has presented itself as the next big thing since the invention of the internet. “So how can we use stories to get people talking? We need to build our own Trojan Horse — a carrier narrative that people will share, while talking about our product or idea along the way,” writes Dr. Berger. In this tune, bitcoin could not have been more successful in using its Trojan Horse narrative to build itself as a legitimate form of currency.
If you made it this far, thank you for reading! I hope this subject was as interesting to you as it was to me, and perhaps it can help you to think about ways can ethically apply psychological rules of influence and virality to drive awareness and adoption of your products or services.
Finally, thank you to both Dr. Robert Cialdini and Dr. Jonah Berger for teaching us all the principles that help marketers like me to more deeply understand what makes us say, “Yes, I would like to buy more BTC, thank you.” 😉 💸
