You hear the word Bitcoin, and your heart jumps. Your eyes look around. Your fingers quickly find itself to the closest device.
Your friends think you’re addicted.
But they don’t understand.
I mean… it’s just a hobby.
I don’t blame you for the obsessive-compulsive behavior. Cryptocurrency prices are so volatile that you could easily lose a significant percent of your portfolio in one day. However, it’s rare to be able to quickly join an emerging market, upskill on the right trading techniques, and potentially make substantial gains within a short amount of time.
You always hear of the Winklevoss Twins and cryptocurrency millionaires (and billionaires) enjoying their new wealth, so it’s tempting to think, if you started investing just a few years ago, how rich you could be now.
In this article, I’m going to walk you through why you’re probably feeling this way and how cryptocurrency addiction creeps in. I’ll also explain the difference between a passionate trader and an and addicted trader ,so you can spot the difference and see where you fall on the cryptocurrency trading spectrum.
Cryptocurrency Trading: A High Gain, High Stakes, No House Game
In the history of trading, it’s extremely rare to see any market or exchange gaining or losing 15 percent in one day.
To give you some context, traders would call it a good day if you close with a 3 percent gain on your portfolio in popular markets like the NYSE. Such high stakes are only available at the casino, but at the casino, the house always wins. Cryptocurrency trading has high stakes and high gains, however, there’s no house to rig the game, so you have the same odds of winning as everyone else. At least, theoretically, as they say in Vegas casinos…
The Beginning: Just Take One Hit
With most traders, their relationship with crypto trading begins quite casually.
You start off seeing crypto trading winners flood your social media pages. The survivorship bias kicks and you get FOMO. So much FOMO that you sign up to a local exchange throw $1,000 on Bitcoin, and check the account the next morning. You can’t believe it. Your Bitcoins are now worth $1,120. Depending on how bullish you are, you’d probably play with your investment for a while or begin gradually increasing your investment.
Despite trading with a minimal amount, traders tend to experience an intense endorphin rush. These feelings are very common as humans are incredibly imaginative creatures.
When we see a 12 percent gain on our portfolio, we don’t see $12. We see the “what ifs.” What if this wasn’t $1,000, but $100,000? I could have made $12,000 if I was brave enough to put some more in?
Most people continue to trade in small amounts, using it as a cheap high. But for many others, once they’ve seen the other side, there’s no turning back.
The Pathway To Addiction
Unfortunately, we live in an age where people tie their self-worth to their net worth. Companies are well aware of this desire for status and wealth. They take advantage of these primal instincts to promote promises like “retiring young” or becoming “financially independent.” These promises are often followed by an MLM program; how to build your drop shipping program; a network marketing scheme; but we’ve heard of these scams, and we know they don’t work.
So here comes cryptocurrency trading. There is no intermediary. No diamond distributor. No bank making the promises. If the cryptocurrency market is anything, it’s the Wild Wild West, and there is cash to be made.
You’ve probably been playing in the shallow end of the pool, with the mom and pop investors, and decided it’s time to play with the big boys. You’re doing the math. You decide to put together whatever savings you have to build a portfolio. I mean, the more the put in, the more you can win, right? You’ve always made around $30 an hour at work, but now, you can make $300 an hour. Why keep that useless car in the garage when you can trade it for some more Ripple…
With the goal of financial independence in mind, the mental justification begins. As humans, we like to think of ourselves as rational beings. To justify risking hard-earned savings, people envision the life they want to lead and make some calculations on how much is enough. From this number, people often build a roadmap to get there. They usually conclude that trading (despite the risks) is a far better chance of reaching financial goals than their current day job.
Living To Trade, Not Trading To Live
The fangs of addiction start to bite from this point onwards. Priorities have shifted. Addicted crypto traders work so they can invest in crypto… instead of working and building wealth or paying bills.
Day jobs become a necessary inconvenience. Since the crypto market is so volatile, traders believe that to maximize their returns, they need to actively pay attention to the market every hour of the day. Unfortunately, this can be problematic and even treacherous to the trader’s performance at work, with their attitudes shifting into doing the least possible without getting in trouble and trading whenever the boss isn’t looking.
You’re scanning the graphs on your commute home when your friend messages you if you want to hit the gym tonight. You decline the offer as EOS is pretty hot right now. There’s that co-worker’s birthday dinner tomorrow you promised you’d go to as well. Probably best to call it a raincheck. All you want to do is to rush home and look at the big screen. Look at your coins. And stare at your portfolio.
Crypto trading has taken over your relationships, your work, and your health. Your friends know it. Your family knows it. You know it. You’ve gone too far. But you don’t want it to stop. You keep going because it feels so goddamn good.
The Passionate Trader: Know The Difference
Unlike the addicted trader, a passionate trader is one that takes trading seriously but is not overly attached to its outcome. They don’t see cryptocurrency trading as a get rich quick run, but instead, as one of many vehicles in the pursuit of wealth.
For example, if a passionate trader makes a large loss from a bad purchase, she will assess the future likelihood of recovery, and if the odds are weak, cut her losses and sell. An addicted trader lets their ego get in the way. They keep holding on as they cannot accept their losses. They also undergo “revenge trading,” allocating more funds to the losing investment, hoping for a winner to come back. People also often perform poorly when they are emotionally attached to the outcome.
Don’t Give Your Life To Cryptocurrency Trading
I’ve had some people come and tell me, if an addiction can make good money, it isn’t that bad. Unfortunately, those who become too attached to trading can have a horrific financial trajectory. There are many instances where people sold their family homes trying to make up their earlier loses, only to lose that as well. There have also been reports of suicide due to significant losses in trading.
Like all markets, it will eventually mature with regulations to come. The swings will soon be smaller. When this occurs, it may not be worth losing sleep over, nor will the pay off be as profitable as it once was.
If crypto trading has become your livelihood, please remember the market will eventually stabilize, making it less profitable to ride the waves. And you might still need a job.
Please make sure that:
You’re not too emotionally invested in your identity as a trader
Crypto trading works for you, around your schedule and that you’re not sacrificing your work, relationships, and health