Cryptocurrency trading addiction is an emerging and real problem

Back then, it was usually a subset of a larger gambling dependency. In more recent years, Paracelsus Recovery’s clinics in Zurich and London have seen a marked increase in clients who have never gambled or would never even go to a casino suffering from cryptocurrency addiction. The problem is fuelled by social media where investors gather to swap tips.

As one of the only clinics in the world to treat this problem, we can say with some authority that cryptocurrency trading can be as addictive as hard drugs. The number of people seeking help from our clinicians in Zurich and London has tripled since 2018. Some clients have lost millions of pounds gambling with digital money.

Cryptocurrency addiction is a real and an emerging syndrome that needs to be treated as such.

Cryptocurrencies are digital money that is not issued by a bank. You can trade and invest in these currencies like any other – and there are virtually no barriers to entry.

In developed economies, research suggests that as many as one in five adults has now bought cryptocurrencies. There are now more than 1,600 of them, including Bitcoin and Ethereum, and adverts urging people to invest are commonplace on billboards and online. The absence of regulation means the market can go up incredibly fast.

However, the UK City watchdog the Financial Conduct Authority (FCA) is among those warning that the cryptocurrency market is so volatile that those investing should be prepared to deal with the fallout.

The FCA has found that women, the under-40s, and people from Black, Asian and minority ethnic backgrounds are more likely to invest in the currencies, routinely use social media for tips, are overconfident in their investments, are seeking short-term thrills rather than long-term gain and often do not understand the risks.

There are now more than 1,600 of them, including Bitcoin and Ethereum, and adverts urging people to invest are commonplace on billboards and online.

Easy-to-use services, many of them app-based, now offer derivatives of cryptocurrencies that are even more easily tradable (e.g. CFDs or “contracts for difference”), which are aggressively marketed on social media and other platforms. While online and offline gambling is regulated across much of the world, and access to it limited or addiction prevention mechanisms mandated because of the harmful potential to a person’s mental health, cryptocurrency trading is not.

During the coronavirus lockdown, the total value of all cryptocurrencies increased from about £175 billion to more than £1.75 trillion. But the market crashed earlier this year, losing more than £1tn of its value in a matter of weeks. In the UK, cryptocurrency investment fraud also soared 57 percent in 2020, with losses of at least £112 million. Because investments are not regulated, those whose money disappears cannot get compensation or complain to the Financial Ombudsman Service.

Many investors have been seduced by stories of investors making life-changing sums of money virtually overnight. Because cryptocurrencies are highly volatile, when you win, you win big. These big wins release vast amounts of feel-good chemicals in our brains, which is why cryptocurrency trading can be as addictive as gambling or drugs.

For instance, we had one client who became addicted to Bitcoin trading after he lost a huge sum of money and then quickly won it back. His brain would have released an unfathomable amount of dopamine as he went from financial insecurity to safety in a relatively short period of time. However, as his addiction grew, he developed a tolerance and had to invest more and more to obtain that satisfaction.

We have also seen more subtle cases of cryptocurrency addiction. Another client was struggling with an alcohol abuse problem that he assumed was due to issues in his career. It was only after weeks of intensive therapy that he realised his drinking was a way of numbing himself from the pain that came with losing millions in Ethereum investments. When people lose, the sense of shame, guilt and despair can be immense. More often than not, it leads to substance abuse dependency or depression.

We saw cases of cryptocurrency addiction skyrocket during the pandemic as trading became a lockdown hobby. But it quickly turned into a substitute for people’s usual unhealthy coping mechanisms. For example, in the pre-pandemic world, many high-net-worth individuals would work 60 plus hours a week and then let off steam on a Friday night. Without that routine, people began looking for other means of obtaining that relief. It can generally be said that problematic trading is most often the result of other underlying problems and in itself a coping mechanism similar to drinking alcohol or consuming drugs; it can start out as a “feel-good” distraction from existing problems (from relationship issues to childhood trauma, pandemic-induced anxiety or many other things), particularly when currency prices sky-rocket, and develop into a full-blown dependency when the brain’s reward system gets hooked on the ups and downs of the market, no different from winning or losing in a casino.

The total value of all cryptocurrencies increased from about £175 billion to more than £1.75 trillion during the coronavirus lockdown.

It is the lack of regulations that make cryptocurrency trading so addictive. Unlike regular stock trading, cryptocurrency trading is both poorly regulated and often poorly understood. As a result, prices undergo huge fluctuations. While this can seem exciting, it also makes the process much more like gambling than investing. The promise of a potentially huge windfall does not only seduce small-time gamblers but attracts experienced and wealthy individuals as well, who often falsely feel they understand the market as a “sophisticated investor” and are down-playing the role their brain’s reward circuit plays in their decisions to gamble with higher and higher amounts, often into the millions.

Health warnings are essential because when we see such a warning, it sends a signal to our brain telling us to watch out. These signals are crucial in controlling our brain’s feedback loop. Without adequate awareness and regulation, cryptocurrency addiction could become an epidemic within the next few years.

We have developed the first warning signs for cryptocurrency addiction, which include:

• Finding yourself preoccupied with the latest cryptocurrency news (e.g. always keeping a CoinMarketCap tab open in your browser).
• Constantly checking market prices or portfolio values, several times per day or even per hour.
• Trading in secret or minimising the extent to your loved ones.
• Experiencing an intense urge to continually increase the amount of money invested.
• Feeling anxious, irritable or losing sleep when you try to stop.
• Difficult emotions such as guilt, anxiety or stress trigger an urge to invest.

We would also urge people worried about their cryptocurrency habits to ask themselves the following questions:

• Is the price of Bitcoin the last thing you look at before you sleep and the first thing you check when you wake up?
• Do you sometimes find yourself acting on irrational beliefs, such as feeling ‘lucky’?
• Do you carry on trading in cryptocurrency after losing money in an attempt to gain it back?
• Do you find it hard to identify what you are feeling when you are trading?
• Have you failed to meet deadlines or expectations because of your cryptocurrency activities?

If you answered yes to any of these, you might be developing a dependency.

Jan Gerber, CEO & founder, Paracelsus Recovery.