Mental health and crypto: How does volatility effect well-being?

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The crypto world is known for its volatility. Especially in the early days, the digital asset experienced extreme price swings over the course of a day, gaining or losing double digits. It appears that the current bear market is no exception to this trend.

While the wildly fluctuating prices offer opportunities to make profits – if you are lucky enough – the volatile behavior of digital assets can pose a threat to investors’ mental and emotional health.

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Mental health is an extremely important aspect of human life, which until recently was not given much importance in the mainstream media and discourse. Financials and investments can play an important role in emotional well-being, while the constant frustration caused by the volatility of crypto markets can hurt.

This was demonstrated well after the Terra debacle, when the ecosystem’s stablecoin collapsed, sending the crypto market into a spiral and eroding trust in the crypto ecosystem.

In fact, after the price crash, suicide hotlines for several countries appeared on the LUNA subreddit, as many investors’ savings and investments were exhausted within hours.

fear and failure

Even when armed with investment knowledge, beginners can take wrong decisions under emotional pressure. Apart from technical and fundamental analysis, the right mental attitude plays a vital role in trading. Under the pressure of emotions, rash acts can be made, which usually lead to mistakes and serious losses. These mistakes can be divided into several groups:

  • Gambler Syndrome: New investors start opening large numbers of transactions without even thinking about it.
  • Premature exit from a trade: In the first successful transaction, beginners take profits quickly and close the position prematurely. In this case, they lose part of the profit they could have received.
  • Dependence on other market participants: Many traders are guided by the signals and opinions of established market participants. However, it is necessary to be independent of these factors to get maximum benefit.
  • In case of losses: The cryptocurrency market is susceptible to sentimental trends. Prices react quickly to a variety of statements and rumors, so it will not be possible to completely get rid of the influence of emotions.
  • Excitement from the first deal: The first profit gives a positive feeling to the trader, which can lead them to become undisciplined.

Many crypto enthusiasts refer to FOMO, or fear of missing out, on a potential deal. Another major fear in the crypto world is related to hackers. The digital, decentralized and often anonymous nature of crypto makes these assets more vulnerable to hacking and scams.

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These are several factors that can affect the mental health of cryptocurrency investors. To limit the psychological impact of financial stress, it is important for investors to determine how much risk they can afford.

new disease

Over the years, cryptocurrencies have risen and fallen several times, which could not help but affect the mental health of crypto investors.

According to experts, crypto trading can turn into a real addiction. The first symptoms of this psychological disorder occur when traders constantly follow price fluctuations in a digital currency. Experts refer to this process as “day trading” and consider it another form of gambling, and people who are addicted to trading cryptocurrencies are called “crypto addicts”.

Source: Paget Michael Krellman

The main symptoms of crypto addiction are muscle tension, anxiety, constant thoughts about trading digital currency while monitoring digital asset prices round the clock and doing other things related to the crypto industry. All this leads to depression and insomnia.

In some countries, special programs have already emerged that help address the mental health problems associated with digital asset trading.

Who’s at risk?

Fortunately, not every crypto investor is subject to mental health issues.

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 when trading.

The people who are prone to crypto addiction are people who love gambling and don’t really trust the authorities. A strong desire to have nothing to do with the state turns such people into cryptocurrency.

People who like to deceive and manipulate others for their own interests, such as cynical and prudent people, also fall prey to crypto addiction.

Narcissists are also susceptible to crypto addiction. Such individuals are usually incredibly confident and, therefore, prone to risky investments. Also, they like to focus on the positive side of life, believe in their bright future and think that nothing bad can happen to them. It is this unshakable confidence that drives narcissists to take risks and buy cryptocurrencies.

People with high levels 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 probably prefer risk. In addition, psychopaths are impulsive. This quality combined with a propensity for risky behavior makes them prone to risky trading behaviour. They are afraid of missing out on the benefits that others get.

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Sages also prefer to invest in Bitcoin (BTC) because, like psychopaths, they do not want to miss out on the potential reward. For them, the pleasure of someone else’s pain is associated with a feeling of superiority over others. At the same time, both psychopaths and sadists, unlike narcissists, have no illusions about their possibilities, which is reflected in their passion for cryptocurrencies.

Of course, not every crypto investor is mentally disturbed. However, most people are not addicted to trading digital assets. It is worth remembering that when starting to trade cryptocurrencies, one must take into account all the facts that can affect one’s health and well-being. To limit the psychological impact of cryptocurrency stress, it is important for investors to decide how much risk they can afford.

According to Sergei Mihaev, product manager at investment platform United Trader, investors should not focus solely on cryptocurrencies:

“First of all, stop treating crypto only as a trading instrument, unless you are a professional day trader with many years of experience. If you are an investor, it is better to understand that price How is it created and why does it change, a certain coin’s value and market behavior patterns. Then, you get a bigger picture. One way or another, you realize that a crypto is a developing industry, which means The best strategy is to just buy and hold. Remember that time is on your side.”