With the current market crash, and more stakeholders than ever before in its history, cryptocurrencies like bitcoin are under the spotlight of psychologists and behavioural health practitioners. Are we seeing the rise of a new form of gambling? Are people exposing themselves to more risk than they should, against a backdrop of potentially huge rewards? My answer, as an addiction treatment provider, would be an instinctive ‘yes’. Then again we should be wary of labelling anything that looks compulsive and rewarding as ‘an addiction’, before investigating further. So here’s the current state of play as I see it. But first, a bit of background. Apologies in advance to crypto veterans.
Cryptocurrencies are digital currencies issued by cryptographic decentralized systems such as blockchains (distributed ledgers enforced by a disparate network of computers). This is a complicated way of saying that they are forms of money that are not issued by centralized authorities like banks or governments.
BTC is probably the most well-known cryptocurrency. Obviously it was not the first ever use-case of digital money, but it was the first cryptocurrency as we currently understand the term. Developed (allegedly) by a mysterious and currently unidentified individual (or group of individuals) by the name of Satoshi Nakamoto it first came into the spotlight around 2009/10.
During the twenty-teens there was an explosion of other cryptocurrencies (collectively called ‘alt-coins) and this brand new fintech went through an massive growth phase. But it was not really until around 2015-17 that ordinary investors started buying cryptocurrencies – most notably BTC and other well-known alt-coins such as Ethereum (ETH).
Fast forward three or four years and we are now potentially seeing the emergence of what looks like addictive behaviour akin to gambling in regard to speculating on these digital currency markets. There have been several high profile news stories (including this one by the BBC) which have documented them.
There are even addiction treatment centres that are treating crypto trading as an addiction. Castle Craig in Scotland, a large and well-known treatment centre has seen a number of patients for crypto-trading addiction over the last year or so.
At Castle Craig, they treat addiction to trading cryptocurrencies as a form of gambling addiction. One of the experts they reached out to when they began their treatment programme was Dr Mark Griffiths, a Professor of Behavioural Addiction at Nottingham University. Griffiths has been a passionate advocate over the years of the idea that gambling is as addictive as any drug.
If you think the idea of crypto-trading as potentially addictive behaviour is an obvious no-brainer, then consider that gambling itself has only recently been accepted as an addictive disorder by the psychiatric community. ‘Gambling disorder’ is now accepted by the APA (American Psychiatric Association) as an addictive condition akin to alcoholism and is included in its clinical diagnostic handbook (The DSM) but for many years it was not included. It took a long time and bags of clinical research to reach the level of scientific consensus and committee approval to be labelled ‘addictive’.
Griffiths has stated that he believes that cryptocurrency trading could be addictive, and that if it is, then the addiction that it most closely resembles is gambling. As a researcher into behavioural addictions (non-substance related addictions like sex, video gaming and gambling) Griffiths holds the view that; “if the rewards of engaging in the activity are constant, I would argue that some individuals can become addicted to almost anything.” He outlines the main criteria for a behavioural addiction as follows:
- Salience: Salience means ‘of the highest importance’. In relation to addiction it means that the activity or object of the addiction becomes the most important thing in that person’s life.
- Mood modification: Refers to the use of the activity as a way of self-medicating one’s feelings.
- Tolerance: As with substances this refers to the need for more and more of the ‘drug’ to get the same feeling.
- Withdrawal symptoms: Withdrawal symptoms are the psychological and/or physiological feedback you get when you are not doing the activity.
- Conflict: Conflict is when the activity takes over and displaces the other activities in your life.
- Relapse: A relapse is when you return to problematic use of the activity after a period of abstinence.
So could crypto-trading fit this criteria? Well, on a trivial level I think all of us who have delved into the world of cryptocurrencies could identify with it. But let’s look at it.
In terms of salience there are numerous traders both professional and of the mom-and-pop-variety, who would admit that cryptos have become an obsession for them. Perhaps they have staked rather more than they can afford to lose on various cryptocurrencies and are thus inordinately interested in price fluctuations. It is worth remembering that the price fluctuations in crypto are far greater than in stocks and shares on the regular financial markets. As we shall see, this may well be the factor that contributes to its greater addictive potential. Having excessive amounts of skin in the game makes salience pop.
As for mood modification, who doesn’t feel either a jolt of reward, or a stabbing feeling of regret each time they check the price of their BTC or other cryptos. Huge lows (in mood as well as fortune) make the corresponding highs so much better. No-one ever got addicted to their monthly salary cheque no matter how large it is – because it’s so predictable – it doesn’t keep you hooked in. There is little addictive potential in things that are so un-novel (one of the reasons addicts are always upping their dose). And this leads us nicely to the next point.
Tolerance. On a fairly trivial level I think most of us have had that feeling that we need to buy more and more BTC in order to feel the same speculative thrill. Or perhaps we are unhappy with the profit margin of BTC and decide to speculate on a lesser known coin due to the greater risk-reward ratio. But just imagine the trader who has a history of addictive gambling. This is a situation where any gains made cease being medicinal very quickly. Larger sums need to be staked in order to get that rush.
As for withdrawal symptoms – we’ve all had mild doses of that too. It’s that sense of restlessness and craving that you get to check the price of BTC for the tenth time since breakfast. I think this is probably fairly normal. But when you’re waking up in the middle of the night to check prices – IS THAT NORMAL? Again, the 24/7 nature of crypto markets coupled with extreme volatility actually makes it necessary for professional traders to keep their eyes on the ball 24 hours a day in order to take advantage of any market moves that might occur at 2am or 3am in the morning. Opportunities which might be long gone by 9am.
As for Griffiths final criteria relapse – well, with behavioural addiction this is often less black and white than with substance addictions. But let’s say you decided to do a digital detox for 48 hours due to the agitation that price checking causes you. But you only make it 2 hours. Or, worse, let’s say you’ve sold all your crypto because you lost a lot of money and swore you wouldn’t do it again, but then you change your mind on a whim and restart your trading account and begin buying again with money you can’t afford to lose. That’s probably what relapse would look like.
Crypto addiction in the media
There are some notable examples of all of this starting to crop up in media. One example is the BBC story I mentioned above, about a BTC trader who gambled away millions of pounds of his employers money and wound up facing charges of embezzlement before his family decided to send him for treatment at Castle Craig.
In another excellent article on the website coindesk there is a similar story, but at the other end of the social spectrum.
In Oregon, a 30-year-old factory worker had got himself a serious slot machine habit. As with all addictions (including gambling) tolerance kicked in and he soon craved variety;
“I was looking for alternatives to slot machines, and I got really into crypto”
Eventually he moved more or less exclusively to trading crypto which replaced his previous preferred gambling activity (slot machines) as he explains below;
“My plan was to try and fix my gambling debts using crypto speculation, but all it did was keep my gambling addiction alive, and eventually led to greater gambling addiction”
In the addiction treatment field this is what we call switching the route of use. Imagine a heroin addict who is spending too much cash by smoking heroin so he decides to get more bang for his buck by injecting. Initially it is cheaper, plus he gets more high. But eventually he winds up getting tolerant to mainlining just as he did with smoking. Now he has multiple health risks associated with injecting as well as a bigger habit requiring more funding.
Re-routing addictive behaviours never works. As the subject of the interview noted, all it did was keep his gambling addiction alive. In fact, it put it on steroids.
Crypto trading as a sub-type of gambling
Let’s go back to Dr. Griffiths and his assertion that crypto trading could be a form of gambling.
Griffiths argues that if cryptocurrency trading was addictive then it would not be a new area of gambling at all but merely a sub-type of an existing form of gambling, namely online-day-trading, which is a form of speculation. Speculation is one of the four recognized types of gambling, which are;
- Gaming – putting money on a game such as the aforementioned slot machines, or card games such as blackjack or poker.
- Betting – putting down money on the correct prediction of a future event (usually a sporting event)
- Lottery – the winning of prizes from a collective lot
- Speculation – putting money into shares on the stock market or trading in shares or other profit generating mechanisms linked to financial markets
According to Griffiths, until the 1990’s many gambling researchers (including him) did not really accept speculation as constituting ‘gambling’ – as such – due to the fact that it relied (at least in part) on skill or inside information. But then again, as Griffiths points out, you could say the same thing about poker.
However, as Griffiths outlines in his blog, this was called into question when spread-betting became popular in the 90’s and people started to use their knowledge of sports to ‘speculate’ on more accurate predictions than a mere win or lose scenario.
So ‘speculating’ in the general sense, cannot be discounted as having addictive potential just because it also contains significant elements of skill.
Perhaps, as Griffiths originally points out, the real common denominator in addictive gambling lies in the much more basic facts about addiction generally. The fact that it is based in the chasing of ‘rewards’ and the fact that it becomes the most salient ‘thing’ in the person’s life. It must deliver a reward and it must become important to the detriment of most other things in the addicted person’s life.
How reward works in gambling and speculating
As anyone who is even roughly familiar with addiction research will tell you, it is mostly about dopaminergic action in the brain, because dopamine is the main neurotransmitter involved in motivation and reward. Ordinary activities don’t release much brain dopamine, but anything novel, or worth taking note of in survival terms (like high-calorie food, potential mates or money) will potentially spike dopamine levels and prime the brain’s memory and learning centres to remember that source of reward in the future. This is good. Without this faculty we would not have survived as a species.
What many people don’t know is that the most addictive thing possible, is something that varies the amount of reward you get in a random way, while at the same time potentially giving you a massive reward at some time in the future. In other words – it keeps you chasing it. This is known in psychology as ‘unexpected reward’.
Like most other addictions, congenital deficiencies of dopamine function or the pre-frontal cortex (which controls impulse control) likely play a large part in why people gamble, including speculating on stock markets or cryptocurrencies. If you’re the type of person who often ignores the potential negative consequences to thrilling or interesting behaviours and goes ahead and does them anyway, or who gets pretty bored by ordinary ‘slow’ activities like reading a book, then this could be you.
Also people who have other addictions are more likely to become addicted to something as compelling as the crypto-markets. The fact that crypto currencies are so volatile, could well be the thing that is making them more compulsive viewing than the more modest gains and losses of the traditional financial markets. This all feeds in to the neurochemistry of addiction which is geared around novelty, unpredictability and massive spikes of reward.
So is crypto addictive or not?
For now, the jury is out. According to Dr. Griffiths there is no research as yet on crypto addiction specifically. But at the same time it is easy to see that it could very easily fit into the speculation sub-set of gambling. It is worth pointing out that just because behaviours have not been categorised as addictive by the American Psychiatric Association it doesn’t mean they aren’t. It took gambling twenty to thirty years to be included with diagnostic criteria in the DSM5. The pace of the acceptance of new psychiatric conditions into psychiatric profession as a whole, is glacial. And for good reason. It requires a terrific amount of research by a very large body of researchers over fairly long time spans. And then it has to pass sub-committee after sub-committee before even being offered up for consideration. Gaming disorder is up next. It was put forward in 2013 (in the DSM5) as a condition worthy of further study and possible future inclusion.
So maybe by 2030 we will get the official seal of approval on what most serious traders already know, which is that some people trading cryptocurrencies have a serious addiction problem, and are using it to feed their gambling addiction. At least, that’s my analysis. In the meantime, for anyone who thinks their crypto trading feels a bit like gambling and who wishes to get a handle on it, options like online addictions counselling could be a good option.