Crypto Trading as a Form of Gambling: A Thrill Ride For the Brain

Under normal circumstances, people who seek to gamble begin to dabble with it for fun, or for curiosity’s sake. What happens next is they lose money they had no intent on losing, which compels them to try and chase after the loss in an effort to win it back until their money evaporates. In other cases, individuals may gamble because they are going through a rough patch in life and are attempting to comfort themselves. A cycle develops, which manifests addiction. The old adage “everything in moderation” may ring true until the threshold of what constitutes “moderation” has been breached. For example, the thrill of pursuing risky ventures such as high-stakes gambling, crypto trading, or high-risk stock trading can oftentimes compel an individual to dismiss any notion of moderation in their quest for financial gain, and thus, find themselves controlled by their impulses for the satisfying feeling of risk due to its uncertain nature, infused with the excitement from the possibility of hitting the jackpot — even if they lose.  “If people lose a bunch and that lowers their expectations, that will increase how happy they are when they finally do win,” said Robb Rutledge, a neuroscientist at the University College in London. The fact is, all humans have a natural opioid system in their brains that regulates pain, reward circuitry and addictive behaviors.  Rutledge, along with his colleagues, conducted a study with 26 participants whose brains were scanned while they made a series of choices where each decision could result in either an outcome that was certain, or one that wasn’t; a gamble, in other words.  The results at the conclusion of the experiments with the test subjects were interesting. The research team found that when the subjects had a lower expectation for winning, their neurological response to winning equal rewards was heightened.  The evidence was two-fold, supported by the subjects’ own reports of the happiness they experienced in conjunction with the functional magnetic resonance imaging (fMRI) scans, revealing a boost in neurological activity in an area of the brain correlating with dopamine neurons. Dopamine, as it were, is a complex neurotransmitter, which can be linked to fluctuations in an individual’s emotional state.  This was evidenced both by subjects’ own reporting of how happy they felt and the data from the fMRI scans. These scans revealed increased activity in an area of the brain associated with dopamine neurons. Dopamine, a complex neurotransmitter, could in this case be linked to changes in emotional state.  What about endorphins? These play a critical role as well, since they are involved in the brain’s natural reward system — in addition to other natural activities such as sexual intercourse, eating, drinking, and physical wellbeing — endorphins promote pleasure and help to minimize pain. It can even produce the feeling of euphoria.  Therefore, the dopamine driven individual chasing after the jackpot, suddenly experiencing a sense of euphoria will inevitably come back for more, similar to a narcotics addict.

Gambling addiction includes crypto trading

Gambling addiction has recently been linked to cryptocurrency trading, according to a study conducted by experts at the Center for Gambling Studies at the School of Social Work at Rutgers University-New Brunswick. Researchers assert that ardent trading habits with cryptocurrencies is extremely addictive, and that high-risk stock traders likewise share this behavioral characteristic in common with gambling addicts.  The study consisted of a demographic of 876 adults, who had regularly engaged in gambling at least monthly over the past year. The information was gathered through a survey provided online. Lia Nower, a Ph.D. professor and director of the Center for Gambling Studies who also co-authored the study, said:

“People who trade cryptos look very much like those who trade high-risk stocks such as margins and options. Therefore, those who like risky stocks are also more likely to jump into the cryptocurrency trading market compared to those who, for example, invest in stocks over the long term.”

The participants demonstrated that their monthly gambling frequencies caused them to form obsessive traits toward cryptocurrency trading, such as obsessing over the fear of missing out, which continues even after suffering losses of any size,  but also that their habits were on par with others who are addicted to sports or playing the lottery. As with any addiction, as the need to “get ahead” or “make more money” slowly encroaches on the individual, it ostensibly may eventually evolve into a full-blown obsession that has the potential to utterly ruin their life and hurt those around them.  Crypto trading is a fast track to accumulating wealth and the trading platforms are largely user friendly, which helps to attract more people to the trading arena. Compounding the easy to navigate features and the cross-platform versatility, people often maintain multiple accounts across a handful of apps as they follow the variations in price, compare it with news reports, use statistical tools, and try to make educated decisions along the way.  Nevertheless, gamblers who engage in trading crypto and high-risk stocks reported in their surveys that they experienced more gambling complications and greater depression and apprehension than the gamblers who reported trading exclusively in either digital assets or only high-risk stocks. When these two categories were compared, it was revealed that the two share common demographics and gambling desires. For this very reason many experts agree that crypto trading addicts share the same behaviors and mindframe as gambling addicts as it shares the same criteria as gambling disorder, a condition that is medically diagnosable. The study revealed that trading in cryptocurrencies attracts upward of 75% of traders who have a propensity to operate in high-risk trades, which is explained by their lack of impulse control as they are fueled by the thought that they can essentially “beat the market,” as Devin Mills, a co-author of the report put it clearly.  When asked whether there is a specific difference between regular forex and stock trading and crypto trading addiction, Mills told BeInCrypto:

“This is a very new field. So, at this point, there isn’t any solid evidence of differences between trading forex, stocks or crypto. Differences may exist or perhaps it is solely personal preferences as to which market they choose make trades. However, more than likely, we will find that problem stock, forex, crypto trading all overlap. That is, the problem traders dabble in a variety of markets looking for an ‘edge’.”

He also explained that an important distinction to be considered is that there is a difference between investment and speculation — the latter which is, essentially, gambling. “Investment represents long-term positions with lower risk and lower returns.  Speculation represents short-term positions with higher risk and higher returns. Speculation is more closely aligned with gambling due to the shorter holding periods (less than an hour in some cases), the higher risk, and increased returns,” Mills said and concluded:

“Given the volatility of the crypto market, I have argued that the crypto trading is often (though not always) a form of speculation versus investment. This highlights further distinction — it is not the market but the behavior.”

Crypto price volatility attracts gamblers

Because of the volatile nature of crypto trading in general, traders are faced with an increased risk of liquidity. It’s elusive, and incredibly erratic, and oftentimes difficult to predict in any real certainty. This makes for the possibility of gaining a major market value increase one minute, and a spiraling plummet the next. Christopher Burn, a behavioural addictions therapist and former psychotherapist at Castle Craig Hospital, Scotland, told BeInCrypto that “cryptocurrency trading is particularly addictive because it is a very volatile market that is poorly understood – this makes it exciting. Also, it can be done 24/7. It tends to attract the more desperate and those least averse to risk-taking whereas regular market traders tend to be more research-based individuals.”   Unlike most trading stocks and commodities which rely on a market that is open only during certain hours — the crypto market never sleeps. With a market that’s accessible at all hours of the day and night and not subject to regulation, it apparently becomes the perfect trading opportunity and an excuse to escape, for those seeking to immerse themselves in the thrill of making money. Knowing that the market could dip at a moment’s notice and drive the cost down, there’s a chance to buy in at a reduced market price or even lose your investment entirely. Timing is everything. This ultimately plays a critical role when an individual has an addictive personality. Burn further commented that “crypto trading is a form of gambling. Compulsive gamblers are seeking escape from reality and excitement and they want these on a regular basis. Addiction itself is often passed on through hereditary genes but gambling of any kind is increasingly a learned behaviour that people, especially the young, are coming to, having started often quite innocently, through computer games which progress into global gaming and then into gambling. Cryptocurrency trading offers them escape from reality, excitement and the chance for monetary gain. I don’t personally have any objection to the currency itself, which has interesting aspects — it’s just the addictive behaviour it generates.”

Background in some other addiction

Gambling without a fixed plan can have disastrous consequences for impulsive individuals, especially if they are inexperienced at making educated decisions in regards to trading. Mills added that, given the limited evidence, it’s hard to say whether the majority of people suffering a crypto trading addiction are new to the trading industry or they shifted to crypto from traditional stock and forex trading. Mills said:

“Those of us who work in this area believe that the advent of apps like Robinhood have spawned a new breed of young traders and that crypto trading also attracts those who are younger and/or are more comfortable in speculative, online environments”

“I would expect that new traders may be at risk of making mistakes and being too reactive to the market with any change, which itself might be a problem. So, I encourage anyone interested in crypto trading (and any other market) to speak with a financial advisor so that they understand all the risks associated with trading as well as the costs with various platforms,” Mills added.  According to Burn, “more than half those with crypto addiction have backgrounds in some other addiction, typically gambling, gaming and substance abuse,” while Tony Marini, senior specialist therapist at Castle Craig Hospital, said that “most are new to tradings and started with spread betting but there are some that have been trading for a while.” With all things considered, as with anything people pursue, it is important to keep a watchful eye on the potential to lose oneself in the excitement that comes with trading, remembering especially what the chemicals in the brain are doing — that natural opioid system that seeks pleasure chasing.