Crypto investment has made many overnight millionaires, but for every success story are dozens of others who have lost their entire life savings gambling on crypto.
Many have blamed the gamification of trading, with apps like Robinhood turning it into a trivial one-click process as well as the rise of influencers who claim to be experts at everything.
Have you heard about the guy who invested his entire savings on Dogecoin and became an overnight millionaire – he now calls himself the Slumdoge millionaire. What about the former U.S navy officer who cashed out his 401k and invested it into crypto, becoming a millionaire? There are endless such stories on YouTube, social media and even on mainstream media. These ‘overnight millionaires’ have inspired a whole movement of crypto gambling – not investing – that’s costing many their entire life savings, and even their lives.
Bitcoin has proven itself to be the best asset class of the last decade. It has outperformed stocks, gold, bonds and nearly every other asset on the planet. This year, it soared to $64,000, and analysts expect it will hit six figures by the end of the year despite the current pullback. Other cryptos have performed even better, with Dogecoin, Shiba Inu, Internet Computer, AMP and Cardano all clocking incredible gains.
People are losing their life savings, and their lives too
However, as with investing in any other asset class, investing in Bitcoin and other cryptocurrencies can be brutal for amateur traders.
Take Jake, for instance, a recovering crypto trading addict from Scotland. He got into Bitcoin in 2015 but it took him a few years to record his first big profit. He instantly got hooked, making thousands of pounds. However, this wasn’t enough. Working in the finance industry, he took to using his clients’ money to trade with. Then one night it happened. He lost £1.5 million of his clients’ money in a single trade that took only 20 minutes. He is now being treated for crypto addiction but was able to pay back the money through the help of family and friends.
Jake is just one, but the number of people who have lost it all as they chase the Bitcoin millions is on a worrying rise. In the U.K, only 1 out of 10 crypto investors is even aware that the national regulator has issued warnings against crypto investing as it’s risky. The FCA recently found that as the popularity of Bitcoin went up, understanding of the crypto went down drastically. This shows a high number of novices who just want to make money, unaware of even what Bitcoin is.
Of the 2.3 million in the U.K who have invested in crypto, 30 percent couldn’t pick out the correct definition of a cryptocurrency from a list of statements.
The FCA stated:
Despite more people having now heard about cryptocurrency, the overall level of understanding has fallen. This suggests there may be a risk of consumers engaging with cryptocurrency without a clear understanding of it.
This kind of gambling mentality is seeing many lose their money, and for some, even more tragically, their lives. In April, an Indian banker committed suicide after losing money on a Bitcoin trade. The 39-year-old mother of two had raised money from friends to invest in BTC. However, she ended up losing most of it and decided to take her life.
‘The crack cocaine of gambling’
Crypto trading has turned into crypto gambling for many novice investors. For many, just because “an expert” on YouTube or even on TikTok suggested buying crypto A or B is enough to make them invest their life savings in the asset. This is not helped by the fact that some cryptos just spike because some celebrity has tweeted something supporting it.
Crypto gambling has gotten so bad that it has become one of the conditions some rehabilitation centers are treating. Castle Craig in Scotland is one such institution. Tony Marini, the lead counselor dealing with crypto addicts described it as the ‘crack cocaine of gambling.’
This is the crack cocaine of gambling because it is so fast. It’s 24/7. It’s on your phone, your laptop, it’s in your bedroom.
According to Tony, one of the biggest issues is that everyone in crypto claims to be making money. How often do you hear that since the market has crashed, it’s time to ‘buy the dip?’ And this works for some, but for others, especially those who get into leveraged positions without the necessary knowledge, that dip could liquidate their entire portfolio. Tony told the BBC:
There are so many people out there that are trading cryptocurrency that are making money. And they’re telling everyone that they’re making money. We are not hearing from the people that are losing money.”