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Cryptocurrency trading can harm your mental health.
A new study published in the Journal of Mental Health Policy and Economics has found that academics who trade cryptocurrency report lower quality of life, worse sleep, and higher stress levels compared to their non-trading peers. They scored lower on quality of life assessments, experienced poorer sleep quality, and had higher perceived stress levels compared to their colleagues who don’t trade crypto.
The cross-sectional study surveyed 437 academics at a state university in Turkey using validated scales to measure quality of life, sleep, and stress. Results showed statistically significant differences between crypto traders and non-traders across all measured health outcomes.
“Cryptocurrency trading is a significant public health problem,” the researchers concluded. They called for raising social awareness about potential negative health impacts and developing specific mental health policies for crypto traders.
The researchers noted several limitations to their study. Data was collected solely through self-reporting, which can be subject to bias. Additionally, the findings may not apply broadly outside the academic population studied, but these findings align with a broader trend in cryptocurrency trading research.
Crypto Traders Share Traits With Gamblers
A recent scoping review published in Addictive Behaviors found links between crypto trading and gambling behaviors. The review found that cryptocurrency traders often share demographic and personality traits with high-risk stock traders and problem gamblers. This overlap suggests that some individuals may approach crypto trading as a form of gambling rather than traditional investing.
“The 24/7 nature of crypto markets and their volatility can create patterns of behavior similar to problematic gambling,” the review authors noted.
The review also highlighted the importance of distinguishing between short-term traders and long-term investors in cryptocurrency. Their behaviors and motivations can differ significantly, potentially leading to varied mental health outcomes.
A study published in Public Health found strong associations between cryptocurrency trading and various forms of excessive behavior. Compared to non-investors, cryptocurrency traders were more than four times as likely to engage in excessive gambling, more than twice as likely to exhibit excessive gaming behavior, and nearly twice as likely to show signs of excessive internet use.
The study also revealed that cryptocurrency traders reported higher levels of psychological distress, perceived stress, and perceived loneliness compared to non-investors. While the differences were not as dramatic as with excessive behaviors, they were still statistically significant.
“Crypto traders have a proclivity for risk-taking and a lack of impulse control,” commented Rachel Goldberg, LMFT, PMH-C. “They are lured in by the promise of quick rewards but stay for the highs and lows, which are similar to addiction. There is a dopamine effect when doing well that brings a high and a desire for more of it. Unfortunately, there are also losing days that bring on very low lows. The allure of getting back that (dopamine) high keeps traders in the game, despite ultimately often giving back any gains.”
Factors Causing Stress Among Crypto Traders
A study published in The Journal of Finance found that 70% to 80% of day traders lose money over time. According to an article by Dr. Andrei Polgar on the Never Trade website, the risk of big financial losses is a major cause of stress for cryptocurrency traders, especially when they use leverage. Traders can lose more than they initially invested, which can seriously hurt their finances and mental health.
Information asymmetry is another significant stressor according to Polgar, with retail traders often lacking access to the advanced tools and data available to professionals. The presence of high-frequency trading creates additional pressure, as traders compete with sophisticated algorithms.
Emotional decision-making also plays a key role in trader stress. Traders must constantly manage their emotions when making decisions, which can be mentally taxing.
The illusion of control, where traders overestimate their ability to predict market outcomes, can lead to increased stress when faced with the market’s unpredictability.
Polgar notes that the time commitment required for trading can lead to burnout and neglect of other life aspects. The high costs associated with frequent trading, including fees and potential tax implications, add further financial pressure to an already stressful activity.
“Crypto trading operates in a 24-hour market, offering no time-out unlike traditional stock markets. While peak activity often aligns with the opening sessions in Hong Kong, London, and New York, the industry’s volatility remains unpredictable, adding a unique layer of stress compared to other high-pressure professions.” added Ajay Dhingra, Head of Research and Analytics at Unizen.
How To Reduce Stress From Crypto Trading
While researchers call for more studies on how crypto trading affects health, current findings provide enough basis for crypto trading platforms to take action. A review published in the Journal of Behavioral Addictions suggests several protective strategies that could be used:
- Setting limits on the time and frequency of price checking
- Educating traders about real risks and limitations of market control
- Encouraging acceptance of good outcomes rather than seeking perfect trades
The review also offers advice for individual traders:
- Sticking to a budget and not spending more than one can afford
- Recognizing losses as potential tax offsets rather than trying to recover them
- Critically evaluating information from social media and seeking diverse, reputable sources
Mental health professionals expand on these strategies:
“Regularly engage in activities unrelated to crypto to maintain perspective and an outside identity,” advises Brianna Paruolo, Psychotherapist. This approach can help traders avoid becoming overly consumed by the volatile crypto market.
Rachel Goldberg highlights the importance of emotional regulation: “On days that don’t go well, it’s a good idea to have a list of coping strategies, such as exercise, listening to calming music, or cooking.” She adds a key point: “If their entire mood on any given day is dictated by how well their investment performs, it’s a good time to reflect on whether this is something they should continue engaging in.”
While individual strategies are important, community help can play a positive role in traders’ mental health. Priya Rednam-Waldo, LCSW MPH, notes, “Anytime people feel seen and understood by a like-minded community, there’s a positive impact to their mental health and the cryptocurrency trading community is no exception. The shared freedom that comes from non-traditional trading along with shared knowledge can alleviate mental stress and insecurity. Traders feel that they’re in it together, sharing risk, reward and even the grief of losses.”
While these strategies can help reduce stress, they are not a substitute for professional help. If you or someone you know is experiencing significant distress from crypto trading, the best course of action is to seek a mental health professional who can properly assess the situation and provide appropriate support.
The Problem Should Be Solved
Even seasoned traders struggle with trading-related stress. Moreover, “The crypto industry brought trading to people that are not normally used to trading. Trading in general requires certain skills and perspectives that professionals learn over the years. Crypto trading attracted a lot of coders, marketers, people that are completely new to trading,” notes Mabel Oza, a blockchain professor at the University of Illinois at Chicago. This mix of inexperienced participants and a volatile market creates significant mental health risks that require urgent attention and solutions.
Disclosure: All quotes in this article without specific source citations were obtained in response to my inquiry through the Qwoted service. The exception is the quote from Ajay Dhingra, which PR specialist Afik Rechler provided from the speaker at my request.