The crypto world is known for its volatility. Especially in the early days, digital assets experienced wild price changes, gaining or losing double digits in the course of a day. It seems that the current bear market is no exception to this trend.
While wild price swings give opportunities to make a profit – if you’re lucky enough – the volatile behavior of digital assets can pose a threat to the mental and emotional health of investors.
Mental health is an extremely important aspect of human life, which, until recently, did not receive much importance in mainstream media and discourse. Finance and investment can play an important role in emotional well-being, while constant despair over the volatility of the crypto markets can hurt.
This was well demonstrated after the Terra debacle, when the stability of the ecosystem declined, spiraling the crypto market as a whole and eroding confidence in the crypto ecosystem.
Indeed, after the price crash, suicide phone lines for many countries appeared on the LUNA subreddit, as the savings and investments of many investors were removed in a matter of hours.
Fears and failures
Even if equipped with investment knowledge, beginners can make bad decisions under emotional pressure. In addition to technical and fundamental analysis, the right mental attitude plays an important role in business. Under the pressure of emotions, reckless actions can be taken that usually cause mistakes and serious losses. These errors can be divided into several groups:
- Gambler Syndrome: New investors are starting to open a large number of transactions without considering them.
- Premature exit from a deal: At the first successful transaction, beginners tend to quickly take profits and close the position prematurely. In this case, they lose some of the profits they could make.
- Dependence on other market participants: Many traders are guided by the signals and opinions of established market participants. To get the maximum benefit, however, it is necessary to be independent of these factors.
- Coming up with losses: The cryptocurrency market is very susceptible to emotional trends. Prices immediately react to various statements and rumors, so it will not be possible to completely eliminate the influence of emotions.
- Euphoria of the first deal: The first profit gives the trader a positive emotion that can only push them to become undisciplined.
Many crypto enthusiasts relate to FOMO, or the fear of missing out, a possible deal. Another major fear in the crypto world relates to hackers. The digital, decentralized and often anonymous nature of crypto makes these assets more vulnerable to hacking and fraud.
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These are just a few of the many factors that can affect the mental health of investors about cryptocurrency. To limit the psychological impact of financial stress, it is important for investors to decide how much they can afford to risk.
A new disease
Over the past two years, cryptocurrencies have repeatedly risen and declined, which could not fail to affect the mental health of crypto investors.
According to experts, crypto trading can turni into real dependence. The first signs of this psychological disorder occur when traders are constantly tracking prices in digital currency. Experts call this process “day trading” and consider it another form of gambling, and people who are addicted to trading cryptocurrencies are referred to as “cryptocurrencies”.
The main symptoms of crypto addiction are muscle tension, anxiety, ongoing monitoring of digital assets and constant thoughts about trading digital currency even while doing other things unrelated to the crypto industry. All of this leads to depression and insomnia.
Specialized programs have been developed in some countries to help address mental health issues related to the trading of digital assets.
Who is at risk?
Fortunately, not every crypto investor is subject to mental health problems.
Scientists from the Queensland University of Technology in Australia recently conducted a study in April on who is most susceptible to crypto addiction and which personalities should pay special attention to their mental health while trading.
Those who are prone to cryptocurrency addiction are people who love gambling and don’t really trust authorities. A strong desire to have nothing in common with the state makes such people turn to cryptocurrency.
People who like to deceive and manipulate others for their own interests, such as cynical and sensible people, are also prone to crypto addiction.
Narcissists are also susceptible to crypto addiction. Such individuals are usually incredibly confident and, therefore, prone to risky investments. At the same time, they prefer to focus on the positive side of life, believe in their bright future, and think that nothing bad can happen to them. This unwavering self-confidence is what drives narcissists to take risks and buy cryptocurrencies.
People with a high level of psychopathy are characterized by heartlessness, low emotional intelligence and lack of empathy. Such people usually have reduced emotional reactions, which makes them resistant to stress and anxiety, so they are likely to like risk. In addition, psychopaths are impulsive. This quality, combined with a penchant for risky behavior, makes them prone to risky business behavior. They are afraid of missing out on the benefits that others might receive.
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Sadists also like to invest in Bitcoin (BTC) because, like psychopaths, they don’t want to miss out on a possible reward. For them, the pleasure of others ’pain is related to a sense of superiority over others. At the same time, both psychopaths and sadists, unlike narcissists, have no illusions about their prospects, which is reflected in their passion for cryptocurrency.
Of course, not every crypto investor is mentally disturbed. However, most people do not develop a reliance on trading digital assets. It is worth remembering that when you start trading cryptocurrencies, you need to consider all the facts that can affect your health and well-being. To limit the psychological impact of cryptocurrency stress, it is important for investors to decide how much they can afford to risk.
According to Sergey Miheev, product manager of investment platform United Traders, investors should not focus only on the cryptocurrencies themselves:
“First, stop perceiving crypto only as a trading tool, unless you are a professional day trader with many years of experience. If you are an investor, it is better to understand how a price is created and why it is changing, the value of a certain currency and market behavior patterns. Then you get a bigger picture. One way or another, you realize that crypto is a developing industry, which means that the best strategy is to simply buy and hold. Remember that time is on your side. “