Cryptocurrency: is it 'investing' or 'gambling'?
Crypto trading addiction is apparently on the rise
Someone in the NHS has figured it out! That putting money into cryptocurrency – for ‘normies’ at least – is more like gambling than investing, which means people are getting addicted to it. Last week NHS boss Amanda Pritchard said the health service is seeing more people turn up in their specialised gambling clinics having become hooked on crypto trading.
There are no firm numbers on this. But Dr Niall Campbell, a consultant psychiatrist specialising in addiction treatment at Priory Hospital Roehampton, told the Daily Mail recently that he’s seeing a ‘steady stream’ of patients who’ve got in trouble with crypto trading. And that it’s ‘very similar to gambling addiction’.
I know this personally. I once held some cryptocurrency during a period of incredible volatility – markets up one day, down the next – and it really can suck you in.
Gambling is thought to be addictive because it stimulated the brain’s reward system like drugs or alcohol. The risk plus reward provides a giant dopamine hit to the brain’s ‘reward circuitry’, which makes us want more. Crypto is not explicitly designed in this way, but the behaviour of cryptocurrency markets is strangely similar. You might wake up one morning to find your ‘portfolio’ is up double or quadruple. Wow! Which is like winning a short odds horse race or betting on a football score. Cue the dopamine hit.
The next day you might be down by a similar amount, as panic selling takes over and tanks your investment. (Not to mention the ever present risk of a cryptocurrency exchange like FTX can suddenly collapse, taking your money with it). But that’s also part of gambling. The losses – the ever present risk – is a vital element of the addiction. It’s possible that exchange collapses, like Sam Bankman-Fried’s FTX, don’t deter investors, because losing it all is part of the game. Many OneCoin investors I spoke to half suspected it could be a scam. But it seemed like that risk was priced in. The potential ‘winnings’ offered by Dr Ruja – sometimes thousands of per cent a year – were worth the risk.
I often think about it this way: the vast majority of OneCoin investors put in €5,000 or less. Let’s say that’s all your savings, and you want to actually improve your life in a significant way. Who wants 30 per cent annual return? How the hell will that do anything? It’s not going to change my life. But OneCoin – like other ‘real’ cryptocurrencies – seemed to offer a life-changing opportunity with a modest investment. The Norwegian guy who bought $100 worth of bitcoin in 2011, and became a millionaire – etc. And that sounds a lot like a bet.
I think cryptocurrency investment in general is built on a very specific mind-set. The successful investment is not about being smarter. It’s not about being more diligent. It’s not about being more informed. It is almost entirely based on being early. Being first, being ahead of the curve. A lot of stock trading is like that, but it’s not entirely about that. And that, ultimately, is not dissimilar to getting a tip on the 3.10 at Ascot.
I know plenty of people who have become hooked on checking their cryptocurrency holdings, in a similar way many of us are addicted to checking social media. The reason we check Instagram et al so often is because the anticipation of information is deeply involved with the brain’s dopamine reward system. Addictiveness is maximised when the rate of reward is most variable. Do I have a new message or notification from anyone? Let’s check and find out!
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