‘Trading is a game of chance, no doubt’: how cryptocurrency trading fuels addiction | Cryptocurrencies

Steven has lost more bitcoins than most people can ever own.

Raised in the remote Shetland archipelago, he dropped out of school at 13 to become a fishing trawler before moving into construction, eventually earning £ 85,000 a year tunneling for Crossrail.

Despite his self-produced success, compulsive cryptocurrency trading, alcohol and drug use have taken over his life.

In the fog of multiple dependencies, he lost five to 10 bitcoin ‘addresses’, making his digital buried treasure – now worth up to £ 300,000 – impossible to recover.

Questions and answers

What is cryptocurrency?

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Cryptocurrencies are an alternative way to make payments with cash or credit cards. The underlying technology allows you to send “money” directly to others without having to go through the banking system. For this reason they are out of the control of governments and are not regulated by financial regulators – and transactions can be carried out in a way that reasonably keeps you a pseudonym.

If you own a crypto asset, you control a secret digital key that you can use to prove to anyone on the network that a certain amount of that asset is yours. If you spend it, you tell the entire network that you have transferred ownership and you use the same key to prove that you are telling the truth. Over time, the history of all those transactions becomes an enduring record of who owns what – that record is called the blockchain.

Bitcoin was one of the first and largest cryptocurrencies and has been on a wild ride since its creation in 2009, sometimes increasing in value as investors piling up and occasionally collapsing again. Dogecoin – which started as a joke – has also seen a stratospheric increase in value.

Skeptics warn that the lack of central control makes cryptocurrencies ideal for criminals and terrorists, while libertarian monetarists appreciate the idea of ​​a currency with no inflation and no central bank.

The whole concept of cryptocurrencies has been criticized for its ecological impact, with the “mining” of new coins requiring vast reserves of energy and the associated carbon footprint of the entire system.

Richard Partington And Martin Belam

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Steven spotted the potential of bitcoin early and had a knack for trading. But even if he had that money now, his addiction meant it would soon be squandered.

“Trading is gambling, there is no question,” he says.

“I studied and studied. I learned for myself how to be a good trader and made an effort to manage my accounts and stick to a number of rules.

“But my mind twitched and I moved all in, like a poker player who thought he had the perfect hand. I was convinced that I would become a bitcoin millionaire.

Now recovering at Castle Craig Residential Care Clinic in Scotland, Steven fears legions of young people will be lured into high-risk and potentially addictive exchanges, based on the same misguided pursuit of unspeakable wealth.

“An entire generation thinks that with a small cell phone they can win, that they can … beat the market,” he says.

“It scares the shit out of me.”

Representation of the Dogecoin cryptocurrency.
Representation of the dogecoin cryptocurrency. Photograph: Dado Ruvic / Reuters

Steven’s fears are founded in part on the rapid emergence of cryptocurrencies in the mainstream.

When he started investing in 2015, digital currencies meant nothing to most people.

Now, they are being touted as a more democratic alternative to a monopoly and exploitative global financial system.

As the Guardian revealed on Friday, cryptocurrency companies launched a record-breaking promotional push in London last year, targeting millions of commuters with 40,000 ads on billboards, tube stations, in carriages and along the sides of double decker bus.

Advertisers included relatively obscure names like Hex, Kraken, and Puglife that consumers know little, if any, about.

Meanwhile, football teams and players, not to mention globally recognized celebrities, promote cryptocurrency investments via social media on a daily basis.

This week, reality TV star Kim Kardashian West and boxer Floyd Mayweather Jr were sued in a lawsuit claiming they helped promote cryptocurrency firm EthereumMax, as they made “false and misleading” statements they left to investors. heavy losses.

An Instagram post on EthereumMax, targeting Kardashian’s 250 million followers, may have been the most viewed financial promotion of all time, according to the head of the UK’s Financial Conduct Authority (FCA).

Yet despite their rise – and warnings that governments could suffer “unlimited” losses, cryptocurrencies remain unregulated in the UK, pending a Treasury review.

This means that the FCA, the UK’s financial regulator, has no power to influence the behavior of the industry.

While some trading platforms that offer digital assets are regulated, because they also offer more traditional financial instruments, cryptocurrencies and tokens are not.

Cryptoasset executives do not have to prove that they are fit and capable people to take people’s money. The companies they manage are not required to hold sufficient liquidity to repay investors in the event of bankruptcy. Nor do they have to worry about the FCA’s clause that financial promotions, such as those launched on public transport in London, are fair, clear and not misleading.

In the midst of the marketing blitz, the Advertising Standards Authority is the only watchdog that has bared teeth. He is studying an announcement of the cryptocurrency Floki Inu and has already banned one for Luno Money.

A cryptocurrency advertising poster in a London Underground station.
A cryptocurrency advertising poster in a London Underground station. Photograph: Gavin Rodgers / Alamy

“If you see bitcoin on a bus, it’s time to buy,” Luno insisted in the announcement, contrary to prevailing investment wisdom.

Luno Money told the Guardian he would welcome an “effective regulatory framework”.

But in the constant void of oversight, experts fear that cautionary tales of addiction, such as the one told by Steven, will be drowned out by powerful and overwhelmingly positive messages.

To track the type of messages sent by marketing teams, the Guardian created an experimental cryptocurrency wallet, containing a mix of bitcoin, ether and Shiba Inu.

While bitcoin plummeted towards the end of 2021 and into 2022, after reaching all-time highs a few weeks earlier, the eToro smartphone trading app’s Twitter account remained stubbornly optimistic.

“Is bitcoin reaching a new high?” He asked at the beginning of the slide. “We have already seen a bitcoin rally. But could he be the one taking him to the MOON? “

The answer, at least for the moment, was “No”. But crypto wallet holders were encouraged to stay positive.

“Your account gained 1.87% yesterday,” reads an app notification, as the collapse decreased. “You had a good day. Share the news with everyone.”

No such invitation has appeared on the much more frequent days when the value of the Guardian’s portfolio has fallen.

“It’s a very strategic marketing ploy,” says Dr Anna Lembke, one of the world’s leading addiction experts, professor of psychiatry at Stanford University School of Medicine and author of the book Dopamine Nation.

“They are encouraging you to amplify the wins and ignore the losses, creating the false impression that there are more wins.”

When asked about it, eToro says it “is committed to helping retail investors interact with each other and foster a learning and collaborative environment”, adding that its platform is not “gamified”.

According to eToro UK CEO Dan Moczulski, some users make their account public so that “all investments are visible to others, whether they are profitable or not”.

The company said it also provides educational tools, runs checks to learn about your clients, and encourages long-term diversified investments.

But Dr. Lembke is concerned about the potential that the social media element can fuel compulsive behavior in cryptocurrency trading, an activity she believes bears the hallmarks of addictive gambling products but without the risk. recognized.

“When you mix social media with financial platforms, you create a new drug that is even more powerful,” he says.

Social media posts pushing cryptocurrencies often refer to Fomo – the fear of getting lost – fueling the desire to participate.

“You have this pack mentality where people talk to each other about what the market is doing, have wins together, losses together, … an intense shared emotional experience.”

“We get a small dopamine spike, followed by a small deficit that makes us try to recreate that state.”

This, he says, echoes the characteristics of gambling but with one crucial difference.

“He’s less stigmatized,” he says. “It has this socially sanctioned status as something that nonconformist intelligent people do.”

The parallels to the game are becoming increasingly difficult to ignore.

GamCare, which runs the National Gambling Helpline, said it receives around 20 calls per week related to cryptocurrencies. Callers reported trading 16 hours a day, making huge losses and struggling to cope with guilt.

As with gambling, where each addict is estimated to harm seven other people, many suffered from someone else’s habit.

One related how his partner’s business obsession was leading them to spend time away from family. Another said their partner had started trading while recovering from alcoholism, spending every waking hour trading.

GamCare has also dealt with young patients who bought digital coins in a desperate attempt to earn enough money to climb the property ladder, only to lose life-changing sums.

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In Castle Craig, where Steven is receiving treatment, the first crypto addict arrived at the clinic in 2016, followed by more than 100 since then.

“More and more people are isolated and doing this [trading], especially after Covid, “says Tony Marini, the senior specialist therapist at the clinic and himself a recovering drug addict.

“It has already increased tenfold since 2016, so what will it be like in the next five years?”

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