Extreme euphoric highs, and devastatingly intense lows. These are one of the hallmarks of addiction, and one of the reasons why investing in and/or trading Bitcoin and other cryptocurrencies can be highly stimulating, mood altering, and addictive. Investing in and trading cryptocurrencies has become increasingly popular by retail investors over the past several years, and compulsive betting in the crypto marketplace has become progressively problematic across the globe. Given that Bitcoin was implemented in 2009 and is still relatively new, little research has been conducted in the field of psychology for its propensity towards addiction. Cryptocurrency addiction has thus far been categorized by addiction experts as a sub-type of day-trading addiction, with similarities to gambling addiction, referred to clinically as a gambling disorder.
Let’s be clear, there is nothing wrong with investing in or trading Bitcoin, Ethereum, or other alternative cryptocurrencies. Just as there is nothing inherently wrong with investing in the stock market, playing poker, or having some alcoholic beverages on occasion. However, as with anything that can bring about instant gratification and relief there is a risk of developing an addiction to it. This article is not meant to spread FUD (Fear, Uncertainty and Doubt) about investing in cryptocurrency, rather it is to serve as a warning and raise awareness that, based on generalized gambling disorder statics, approximately 1% of cryptocurrency traders will likely develop a severe pathological addiction to it and approximately up to 10% will experience problems related to cryptocurrency investing beyond mere financial loss.
What is Bitcoin? – A Brief Overview
The information herein is not meant to be exhaustive, but rather to provide a very basic understanding of what Bitcoin is. Bitcoin was invented in 2008 and implemented in 2009 by an anonymous individual who went by the alias Satoshi Nakamoto. In a nut-shell, Bitcoin is a decentralized (not controlled by banks, governments, or any other authority), open source (the code and ledger are available to the general public), peer-to-peer (users can send and receive Bitcoin without a central server or intermediary) global digital currency (international electronic form of money). Bitcoin allows you the ability to keep your money on a digital device such as your phone or computer, use it anywhere in the world that you have internet access, and send or receive it across the globe.
Bitcoin has been compared to “digital gold” because, like gold, Bitcoin is a scarce asset. Only 21,000,000 Bitcoin will ever be produced (mined), ending in the year 2140. As such, Bitcoin is often viewed as a store of value similar to gold and is viewed as a hedge against fiat inflation. Unlike gold, Bitcoin is easily divisible, as 1 Bitcoin can be divided to the eighth decimal place, and potentially even further if necessary. One can purchase and sell any amount of Bitcoin on a cryptocurrency exchange, similar to how one would invest in the stock market. Once you have Bitcoin, you can keep it on the exchange or transfer it to a personal digital wallet, thereafter where you can hold your Bitcoin (or “hodl” as it is called by crypto enthusiasts), or send and receive Bitcoin to/from other digital wallets if you were to ever buy, sell or exchange something to/from another individual or merchant. You can also easily exchange your Bitcoin back into fiat money at any time. Since Bitcoin’s inception, thousands of other cryptocurrencies have been developed using the same blockchain technology that Bitcoin is based on, but each with their own nuances and different use cases.
Why Is Bitcoin Addictive? – Extreme Highs and Extreme Lows
At the time of Bitcoin’s inception it was worth fractions of a penny, and as of the publication of this article it has reached a peak price of ~$58,112.95 on February 21, 2021. Given the market capitalization of gold and other speculative factors, some individuals have estimated that the price of Bitcoin may someday be worth as much as $500,000.00 or more per Bitcoin. For early investors, Bitcoin has created multimillionaires. In the grand scheme of digital decentralized money, we are still very early on a macro-level, making present day investors very hopeful that they too may vastly increase their wealth from their present-day investments.
However, despite massive gains, Bitcoin prices are also extremely volatile, and trends are cyclical based on the halving of Bitcoin’s production that occurs approximately every 4 years. 30%+ corrections followed by 30%+ price pumps in a matter of hours or days are completely normal during Bitcoin’s bull markets. In the 2017 Bitcoin bull-run, there were 6 corrections that averaged to be 35% dumps each until Bitcoin peaked at near $20,000.00 in December of 2017 followed by a two-year bear market where the price dropped to below $4,000.00. These price fluctuations coupled with the potential for massive price increases is what makes Bitcoin so appealing for many traders. Cryptocurrency investors discuss FOMO, the Fear Of Missing Out on price rallies, and have a desire to continuously check price action and monitor cryptocurrency news.
Other cryptocurrencies, known as “Alt Coins,” are just as volatile and can be just as addictive as Bitcoin as they can rise hundreds or thousands of percentage points in a matter of days or weeks. Some Alt Coins are akin to penny stocks in that they can have an extremely low starting cost but increase massively on a whim, oftentimes to come crashing down once “Alt Coin Season” is over, a time when these alternative cryptocurrencies have historically done well in accordance with Bitcoin’s timing of the market.
Part of what makes Bitcoin and other cryptocurrencies addictive are these huge swings. When a cryptocurrency goes long (in an upward direction) or short (in a downward direction) the investor can make substantial profits in an extremely brief period of time depending on which position they take, long or short. To make trading even more thrilling to the individual but simultaneously more harmful is placing bets with leverage. Leverage trading essentially means that the trader is using borrowed funds to increase their position size on a particular trade. So for example, if a 2x leverage (1:2) is taken it will increase a $1,000.00 gain or loss to a $2,000.00 gain or loss. Some cryptocurrency exchanges allow you to use as much as 100x leverage, and things can get extremely dangerous.
When profits are made, a massive influx of dopamine and other “feel good” neurotransmitters are released in the brain resulting in an extreme sense of pleasure. As with a drug or alcohol addiction, the individual seeks out more and more of this dopamine rush as the brain becomes less able to receive it from other life pleasures. The sense of euphoria triggered by cryptocurrency wins are what makes crypto trading and investing so addictive. Lows are painful, akin to withdrawal for an alcoholic or drug addict, and the focus of the individual turns to making their next trade or seeing the price turn in their favor, akin to “chasing the next high.” Individuals addicted to cryptocurrency trading may say that it is not about the money, but about the rollercoaster-like rush of the highs and lows.
Beyond the brain, there are many other factors that contribute to the progression of cryptocurrency trading from being recreational or a career into a full-blown addiction:
What Are the Impacts of a Bitcoin Addiction?
Bitcoin and other cryptocurrency addictions can have a devastating and far-reaching impact on the individual and their loved ones. Although research is sparse, there are studies as well as anecdotal evidence to suggest that cryptocurrency addiction can negatively impact an individual’s mental health, physical health, relationships, finances, career, and other important life areas.
Before diving deeper, it is worth noting the distinction between trading and investing, and the psychological implications of each. There is a difference between holding Bitcoin (hodling), which you can think about as investing in Bitcoin for the long-term, versus trading Bitcoin, which you can look at as taking frequent continuous positions that the price of Bitcoin will go up (longing Bitcoin) or go down (shorting Bitcoin) in the short-term based on cryptocurrency price charts, other hard data, and various speculative information. Although nobody likes to see their portfolio decrease in value, there is oftentimes a far greater psychological impact and emotional reaction to trading cryptocurrency than investing in cryptocurrency, and trading is oftentimes where problems may be more likely to occur. Nonetheless, both trading and investing can become problematic.
Research thus far and conclusions that can be drawn from other problem gambling behaviors suggests that cryptocurrency addiction can lead to mental health symptoms such as stress, anxiety, depression and mania. It can also lead to problems such as insomnia, as individuals turn to checking price action and their positions in the middle of the night. Some traders may turn to excessive caffeine, Adderall, cocaine, or other stimulant use to help themselves stay awake and alert for long durations of time. Such activity can even lead to visual or auditory hallucinations and mimic the effects of some more pervasive mental health disorders. With respect to all mental health problems that can co-occur with cryptocurrency addictions, researchers warn to not draw conclusions between causation or correlation. Much more research needs to be conducted in the area of cryptocurrency addiction.
Beyond mental health, crypto addiction can impact many other areas of one’s life. As individuals become preoccupied with their cryptocurrency trades, they may start to neglect important life obligations such as their career, hygiene, and family. As such, the family members of an individual addicted to cryptocurrency trading often suffer significantly and are oftentimes the first to recognize that their loved one has a problem.
Cryptocurrency trading and investing can be extremely profitable, but it can also be extremely risky and result in significant losses. As with any gambling addiction, losses may be so severe that individuals who are addicted to crypto trading may be at an increased risk of suicidal ideation and suicide. Not enough research has been conducted on cryptocurrency addiction to reach these conclusions, but individuals should be aware of the potential damaging effects of crypto addiction and be mindful of the signs of addiction as well as the signs of suicidal ideation. If you or a loved one is experiencing any thoughts of suicide, please call the United States National Suicide Prevention Lifeline at 1-800-273-8255 for free 24/7 confidential support.
10 Signs of a Cryptocurrency Addiction:
If you meet even one of the above criteria, your behaviors surrounding cryptocurrency may be something that you should take a close look at, and it may be worthwhile exploring any maladaptive behaviors with a mental health professional who specializes in gambling addiction.
What Can I Do If I Have a Bitcoin Addiction?
The first step to recovering from any problem is having awareness that there is a problem to begin with and then having a desire to do something about. Individuals who may be contemplating if their cryptocurrency trading is problematic should take an honest inventory of their behavior and the broader impact it is having on their wellbeing and to those around them.
Depending on the individual and their relationship with cryptocurrency, investing and/or trading may be something that they can learn to develop a healthy and balanced relationship with, while in other cases it may be something that they need to cut out of their life completely. In either case, there are many lifestyle changes that will need to take place, and in some cases professional help may be required.
For those who continue to trade, some basic suggested guidelines to follow are:
Some Individuals May Have To Stop Investing/Trading Altogether
Unfortunately, many individuals who are addicted to investing and trading may not be able to moderate their behavior. In such cases, individuals may need to stop investing and trading altogether. In severe cases, individuals may need to attend an inpatient rehabilitation center for cryptocurrency addiction and/or seek out an addiction specialist who specializes in cryptocurrency addiction.
Cognitive Behavioral Therapy and Motivational Interviewing have been found to be highly effective in the treatment of gambling disorders. Medications such as anti-depressants or mood stabilizers can also be helpful to treat problems that often coincide with gambling such as ADHD, anxiety and depression. Additionally, mutual help groups such as Gamblers Anonymous or SMART Recovery may also be a helpful tool and form of support for individuals addicted to cryptocurrency. Another resource to utilize if you or a loved one is struggling with cryptocurrency addiction is the Substance Abuse and Mental Health Service Administration which can be reached for free 24/7 confidential help at 1-800-662-4357.
There are also practical steps you can take such as blocking trading exchanges and cryptocurrency related material from your phone and computer. You may also choose to have your funds monitored by a trusted loved one or moved to a loved one’s bank account in the early stages of recovery to help prevent impulses to trade. It will also be very important to find other outlets of pleasure such as by re-engaging in social or leisure activities that were pleasurable in your past or engaging in a new hobby. This will also help reduce feelings of boredom and loneliness that can often trigger a relapse. Also, find mechanisms of self-care such as by focusing on your nutrition, exercise, hygiene, sleep and relaxation through sources such as reading or meditating.
Family members also should seek out professional help for themselves from an addiction professional that specializes in working with family members impacted by addiction. Family members can also seek out mutual help groups for support such as Al-Anon, Gam-Anon, or SMART Recovery Family & Friends.
If you found this article useful, you may also enjoy our article titled, “Am I Addicted To Day Trading? – 10 Signs You Are Addicted To Day Trading and What To Do To Stop.”
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