23 September 2023
The finance industry is a rollercoaster ride and an unnerving experience. The cryptocurrency space is skeptical just like any other financial system and thus fluctuates every single minute of the time. Cryptocurrency is volatile in nature in spite of the growth it has received and so people involved have to be updated round-the-clock if they want to enjoy the benefits of this booming industry.
Making financial decisions can be a very stressful process especially when there is so much on the line and makes the investor stay on the edge. In such a fast-paced industry, it does have an affect on mental health while many people end up taking extreme steps when the market crashes. It is of uttermost importance to take care of the invisible and silent behavior that people tend to ignore.
In this blog, let’s try to understand how the involvement in cryptocurrency’s investment can affect one’s mental health and the relationship between the two.
On Reddit’s cryptocurrency forum, there was a distressing post about how to contact the U.S. National Suicide Hotline with reference to the despondent cryptocurrency investors. A user had even posted, “I just refinanced my house to get in. I’m freaking out.” While another user offered support stating, “If anyone’s actually depressed or suicidal come to https://www.reddit.com/r/SuicideWatch/. We love to listen and talk there.”
Joseph Engelberg and Christopher Parsons, professors from San Diego at the University of California had published a paper in the year 2014, about the link between the admission in the hospital from 1983 to 2011 in California and low daily stock returns and how it affected the psychological nature of an individual.
Joseph Engelberg said,
“Although our work focuses on the broader market, the same logic could be applied to the ups and downs of cryptocurrency investing.” “I’d expect large drawdowns in this market to cause considerable stress for some cryptocurrency investors, and that stress could lead to a noticeable uptick in adverse health outcomes.”
Even researchers from John Hopkins and The College of William and Mary had stated that the loss in wealth has an effect on mental health. When studying the effects of the stock market crash of 2008, they analyzed that wealth loss can cause depression and increases the use of anti-depressant drugs.
On the contrary, people get so engrossed in being constantly updated that it starts being addictive or compulsive.
Jim Smigiel, the CIO at SEI Investments Co., said
“Looking at something with such high volatility all the time is not conducive to an investor’s mental health.”
Vicky Bogan of Cornell University and Angela Fertig of the University of Georgia wrote
“First, mental health may alter cognitive abilities and/or a person's ability to evaluate investment opportunities, which would affect investment decisions. Second, mental health may alter an individual's degree of risk aversion which has been shown to be an important determinant of portfolio choice. Third, mental health may affect an individual's discount rate thereby affecting his motivation to invest for future returns. Finally, having any health shock, physical or mental, reduces productivity and increases medical spending, thereby reducing the availability of funds to invest; it may also cause a household to change its portfolio allocation toward more liquid assets.”
Ways that can help
Due to the present situation of the pandemic, it has financially affected everyone and not just individually but on a global level.
Also Read, 7 Tips To Manage Your Crypto-Portfolio
Cryptocurrency is volatile in nature and so is every sector in the finance industry which makes it irresistible. However, it is important to not fall into it completely and turn yourself crazy.
The price fluctuation or the movement is evident and there is nothing that one can do, but you can try not to obsess over it. Constantly checking on the movement will not change the results and it is unproductive.
Instead, you can fix the goal or plan a strategy for an exit if the price drops to the point you estimate.
FOMO - Fear Of Missing Out is a concept that people fall easily into as they do not want to be too early or too late.
However, it is ideal to not invest all your money in one single cryptocurrency but to choose to invest in others as well.
Diversified investments and re-balancing is a profitable approach for one to invest. Also, you should invest only in the amount of money that you can afford to lose.
The key role you can play when you feel distressed and you or someone you know is affected and resulting in mental health, it is important to seek someone or a professional for help.