The Rutgers University-New Brunswick Center for Gambling Studies conducted research on correlations between problem gambling and the frequent trading of cryptocurrencies. The report appears in the latest edition of the journal Addictive Behaviors.
The study, which was led by Rutgers-New Brunswick’s School of Social Work, is the first to study cryptocurrency trading among regular gamblers. Rutgers and New Brunswick surveyed 876 adults who gamble at least once a month. The conclusion of the research team was that problem gamblers have similar troubles with trading high-risk cryptocurrencies.
The research found that 50% of participants had traded cryptocurrency over the past year. Researchers studied other groups in the sample, such as high-risk stock traders. The report noted that 75% of high-risk stock traders also traded in cryptocurrencies.
The team at Rutgers determined that traders’ impulsivity and belief they can beat the market led to their trading of cryptocurrencies. By inference, problem gamblers showed similar traits to the high-risk stock traders.
What Is Cryptocurrency?
Cryptocurrency is the name for virtual currencies such as Bitcoin, Litecoin, Ethereum, and Dash. A virtual currency is not backed by a national bank — or any financial institutions, for that matter. Virtual currencies’ values also are not tied to commodities, like many currencies through the years have been.
Instead, cryptocurrencies’ value is tied to the trading of the virtual currency — along with scarcity. For instance, Bitcoin is mined from a blockchain and has only a certain number of bitcoin which will ever be produced. Litecoin, Ethereum, and other virtual currencies are produced by their own blockchains, which are both anonymous and transparent.
Why Do People Use Cryptocurrency?
Because virtual currencies offer users full transparency — they can see every single transaction added to the blockchain, as well as the mining of units — people trust the use of the cryptocurrency. Because they offer privacy or anonymity, many people like to use Bitcoins and its rivals for online payments.
After each transaction, the owner of a cryptocurrency unit receives another unique code, so identity thieves and hackers cannot steal the users’ money. This provides safety and security from theft, which adds to the allure of cryptocurrency. Though it is not backed by a bank or a national government, cryptocurrency has proliferated in the wake of the Global Recession.
Problem Gamblers and Cryptocurrency Trading
There are downsides. Bitcoin rose steadily in value over the past 10 years, eventually reaching around $19,000 per bitcoin. Then the market declined rapidly, so eventually the bitcoin market settled around $4,000. Those who dabble in high-risk trading can do the same with Bitcoin or Litecoin, so it provides a chance for quick profits with a big risk.
Devin Mills, the lead author of the report, stated, “For some people, trading cryptocurrency is seen as an investment opportunity. But there is an alarming proportion of people who are ‘gambling’ on these cryptocurrency markets as they would gamble on horses or sports or slots. And it has the potential to get them into significant trouble.”
With the wild swings of fortune, one can see how problem gamblers would enjoy investing in cryptocurrencies. People often compare investing to gambling. It is in many ways a false comparison, but when it comes to cryptocurrency, betting on the fluctuations makes the two similar.
What Is Problem Gambling?
In the DSM-IV guide to psychological conditions, the American Psychiatric Association determined there were 10 diagnostic criteria for pathological gambling. DSM-5 removed one criterion involving “illegal acts”, so the latest diagnostic measure for pathological gambling has 9 criteria.
The guide has two types of problem gambling: “subthreshold” pathological gambling and pathological gambling.
Subthreshold problem gambling is what is generally described as “problem gambling” — where a person encounters problems from their gaming activities, but is not considered pathological — and it is defined as a person who meets 1 to 4 of the criteria. If a person matches 5 or more of the 9 criteria, they are considered a pathological gambler — which is a much more serious diagnosis.
9 Diagnostic Criteria for Pathological Gambling: DSM-V
- Preoccupation with Gambling: Ruminating on one’s past gambling experiences or planning the next gaming trip (obsessively).
- Compulsion: Repeated attempts to control, limit, or stop one’s gambling — unsuccessful attempts.
- Withdrawal-like Symptoms: Restlessness and irritability when you stop gambling for a time.
- Coping Mechanism: Gambles to escape problems or to relieve feelings of anxiety, depression, helplessness, frustration, or guilt.
- Tolerance or Escalation: Escalating gambling activities. Like a drinker who needs more alcohol or a smoker who needs more nicotine, this involves increasing amounts of money over time.
- Negative Consequences: Jeopardizing or losing jobs, educational opportunities, career opportunities, or relationships due to gambling.
- Financial Reliance: Relying on friends and family for cash during a desperate financial situation caused by gambling.
- Chasing Losses: Returning another day after a losing session to make up for losses. Going on tilt.
- Lies about Gambling: Dishonesty to keep family members, friends, and therapists from learning the extent of your gambling.
It should be noted that problem gambling or pathological gambling each presents a gambler with risks. Both have consequences, but pathological gambling is a much more serious than subthreshold pathological gambling. Problem gamblers are thought to include 1% to 2% of the gambling community, though some anti-gambling researchers claims the percentage is closer to 3% to 5%. Pathological gamblers make up less than 1% of the gambling community.
Problem cryptocurrency trading has its own diagnostic criteria. According to the Rutgers research team, here are the 8 diagnostic criteria that a person engages in problem cryptocurrency trading.
Problem Signs of Cryptocurrency Trading
- Spending lots of time on cryptocurrency trading activities.
- Checking virtual currency prices obsessively.
- Lying to friends and family about one’s trading activity.
- Debts and financial problems rising from trading.
- Anxiety and physical symptoms, such as tremors and sweating.
- Mood swings, depression, and feelings of hopelessness.
- Chasing losses, or unrealistic views about getting “hot” or “lucky”.
- Attempts to control one’s trading without success.
The upshot is both activities have high volatility and financial speculation, so they draw many of the same personality types. Whether it is problem gambling, cryptocurrency trading, or high-risk stock trades, anyone involved should be aware of the risks and not just the opportunities. Knowing the warning signs of problem trading or problem gambling is important for those who take part in the activity, but also for the friends and family members who might be the last line of defense for someone with compulsive behavior involving money and finances.