Cryptocurrencies by half: investors on the verge of a nervous breakdown

Published: 28.11.2022 – 16:54

2022 is ending with a dismal year for the cryptocurrency, whose global market has lost more than two-thirds of its value over the past year. A tricky situation for investors who are trying to keep their cool while betting on better days.

In the world of cryptocurrencies, the euphoria of the big days has come to an end. After an exceptional 2021, the virtual currency market experienced a dizzying fall in 2022, losing two-thirds of its value. Already facing a major crisis of confidence, the sector is now grappling with the fallout from the FTX scandal. This exchange platform, a major player in the sector, was forced to file for bankruptcy on November 11 after the exposure of fraudulent transactions affecting several hundred thousand creditors worldwide.

On November 10, 2021, Bitcoin hit an all-time high of around $69,000. A year later, the leader in cryptocurrencies just fell below the $16,000 mark at the end of a dismal year. Experts estimate that the $3 trillion global market is currently worth less than $900 billion.

“This period of strong growth, called a “bull run”, followed by a significant drop, a “bear market”, is a classic of finance, which we have already experienced several times in the cryptocurrency market,” emphasizes Cedric Tampestini, investor and French YouTuber. . “But it is true that the magnitude of the fall in 2022 surprised investors in the sector: no one thought that Bitcoin could fall below $20,000 again.”

A year and a half ago, Romain, a young 20-year-old student with a keen interest in trading, decided to go “all the way” in cryptocurrencies, attracted by the high returns in this sector. While he explains that he limited the damage by selling his holdings at the start of the bearish period, he readily admits that the bleak context is weighing heavily on his morale.

“I work hard to find my place in this environment and make a living from it. I invest, train, and also write for specialized publications. It’s a lot of work. The problem is that the bear is having an impact on the entire ecosystem: earning is getting harder and general interest in crypto is declining This is not a sudden collapse, but a slow and painful period during which it is difficult to stay on the bar In such a context, people, a little feverishly break , sell at the bottom and lose a lot of money.”

While the cryptocurrency’s most die-hard followers continue to invest in the belief that a recovery is coming soon, others are now openly showing their anxiety on social media. At the same time, recent research warns of the potential psychological danger associated with this activity, an intense stressor that can lead to depression.

Addictive risk

In recent months, several groups of researchers have become interested in the psychological implications associated with the use of virtual currencies. A University of Queensland, Australia study finds a “strong similarity” between the behavior of some crypto traders and avid gamblers who develop a form of addiction that can lead to ruin and severe depression.

“Cryptocurrency is certainly not the only area in which users are exposed to this kind of psychological risk, but it is a particularly fertile ground,” analyzes Natalie Janson, professor of economics, an expert in this field. “Some virtual currencies, such as bitcoin, are in limited supply on the market. Therefore, volatility is especially high because it is impossible to adjust production according to demand. At the same time, cryptocurrencies are generating new economic models, the reliability of which is difficult to test. as we recently saw again with FTX’s sudden bankruptcy.”

Emotion management

Over the past few months, the crypto crisis has exposed weaknesses in the sector, leading to a series of bankruptcies. French investor Cédric Tampestini admits he suffered severe heatstroke during the FTX deal. “I invested 100,000 euros there, believing that it is a solid player. Luckily, I was able to withdraw my balls a few hours before the withdrawal lock.”

To counter stress, the entrepreneur explains that for several years he has been using a coach to help him understand his own psychology and manage his emotions.

In France, several firms specialize in this area, such as Emelio, based in Aix-en-Provence. “We do not give financial advice, but work on behavior to avoid risky actions,” explains Cecile Cubadda. The founder of the company, herself a cryptocurrency investor, cites as an example the “FOMO” syndrome (abbreviation for “Fear of Missing Out” in English), which characterizes anxiety about a missed opportunity, “revenge trading”. , which pushes you to invest more and more in order to ward off feelings of defeat or even “dirty panic” when a lot of stress prevents you from taking action.

“If you lose the rational aspect in the crypto business, then you can safely go to play in the casino. That is why control over emotions is absolutely necessary in our field, ”she emphasizes.

Although he has never consulted a coach, young investor Romain also shares this approach. “Because prices are low, I recently started investing again. But I have made an investment plan for myself in advance to avoid impulsive decisions, and I only invest money that I can afford to lose,” he says. As prices continue to fall, Romain avoids following market developments too closely to protect himself. He bets on longer-term profits, knowing full well, no matter what, that the statistics are against him. Because in such a market, “for the few to win, the many must lose.”

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