Do you or any of your relatives hold bitcoins or other cryptocurrencies? If so, you are one of the 425 million people who own them worldwide. Did you know that 13% of Canadians have invested in these very volatile markets in 2022?(1) A third of people who buy cryptocurrency do so to generate medium- to long-term returns. Like Wall Street brokers, crypto “traders” monitor the market every hour of the day to determine the best time to buy or sell their assets.
If you are not familiar with cryptocurrencies, know that this market operates 24/7 and allows you to engage in speculative transactions. To maximize their earnings quickly, traders engage in risky trades and may sometimes borrow money from third parties. The problem is that cryptocurrency is an excessively risky market: the price of virtual currencies can drop drastically and cause massive financial losses.
Are there health risks for cryptocurrency traders given the high risk of financial losses?
What research tells us
A scoping review of eight studies compared the psychological profiles of cryptocurrency traders to those of compulsive gamblers and looked at related mental health issues, such as depression and anxiety.(2)
Who are cryptocurrency traders?
Cryptocurrency traders are typically men aged 24 to 44, educated, with a high income, who already own stocks or other investment funds, who are comfortable with risk. That being said, studies examined in this scoping review highlighted the growing interest in cryptocurrency among older adults and retirees.
Cryptocurrency traders share a few common psychological traits:
- search for novelty
- addiction to rewards
- fear of missing out on rewarding social experiences
What is the link with gambling addiction?
The scoping review reveals that compulsive gamblers may engage in the cryptocurrency market as if it were another form of gambling. Cryptocurrency traders may also engage in other gambling activities such as sports betting and risky stock trading.
Traders who has borrowed money and experienced losses will want to "rebuild" and earn a large amount of money to recover their investments and pay off their debts. In doing so, they will borrow more and always bet more, confident that he will succeed next time. These are symptoms of addiction.
What are the effects on mental health?
People who engage in both risky stock trading and cryptocurrency trading have more depressive and anxious symptoms. Cryptocurrency traders experience more loneliness, psychological distress, and stress than monthly stock investors and non-investors. Cryptocurrency and stock traders are more likely to have bipolar disorder.
Are you addicted to day trading?
If you (or someone close to you) are constantly preoccupied with trading and market fluctuations, are focusing your efforts into “recovering” from financial losses, or are isolating yourself from your family and friends, you may have developed an addiction.
Resources exist to help you identify signs that are similar to problem gambling and find help.
Be vigilant and avoid fraud!
The potential profits linked to cryptocurrencies are enticing, but beware of offers that are too good to be true! Learn to recognize frauds and scams.
To protect yourself against frauds and scams:
- check if the platform you plan to use is registered
- check whether the person or company advising you has the right to sell financial products or give advice
- subscribe to the newsletter of your provincial or territorial security regulator (like the Ontario Securities Commission or Quebec's Autorité des marchés financiers) which offer resources about cryptocurrency.
To learn more about:
- Cryptoassets, regulations and fraud protection, visit GetSmarterAboutCrypto.ca.
- The basics of investments: GetSmarterAboutMoney.ca.
In Canada, capital gains are taxable at 50%, including those generated by the sale of cryptocurrencies. Don't forget to declare them in your tax return!