Ever thought about your crypto exit strategy? No? It’s okay, most people didn’t. Now is not the time to leave anyway.
Let’s visualize something nice! Think about the scenario where you made out like a bandit and reached your boldest financial goals thanks to investing in crypto. Now tell me this – would you stop there, wash your hands off and do something else? I think that’s unlikely.
People rarely leave the table while winning. But! I think it is even harder to ‘walk away’ while your portfolio looks like ketchup. Today I would like to ponder about the psychological nature of negative cryptocurrency involvement and the challenges people face when attempting to disengage from this volatile realm in general.
There are a lot of emotions at play, and I’ll try to shed some light on the complexities that keep unsuccessful people entrenched in the crypto world. By examining some factors, we could gain insights into this phenomenon and find a new perspective on the relationship between people and crypto.
So, let’s talk psychology a bit, shall we!?
‘You Know It’s True Nobody Ever Really Quits’
As they said in Sin City, ‘smoker’s a smoker when the chips are down!’
In my opinion, nobody goes ‘cold turkey’ on crypto voluntarily, and often it takes a lot of combined factors or something rather extreme to make an investor call it quits.
When starting my research, I clicked on a few YouTube videos where content creators claimed that they ‘have had enough’, only to change their tune by the end of the rant and shill me some obscure project or platform, asking for likes. Understandable, have a great day!
Fair to say, some people don’t really mean to quit crypto, they only use some loud dramatic words to generate a clickbait title and attention to their content or persona.
But hey, some creators actually mentioned a lot of good reasons that might push someone over the edge: losing a seed phrase or money through a wallet vulnerability, finding yourself on the receiving end of a rugpull or pump and dump scheme, experiencing scam fatigue and mental strain associated with the stressful and volatile nature of market.
So many reasons! But most people chug along nicely, simply because they’re hooked.
Here I see a correlation with an old experiment, where mice needed to press the lever multiple times before receiving a reward, and the number of required lever presses varied randomly. Despite the uncertainty, mice continued to press the lever in the hopes of receiving a reward.
The key finding of this test was that intermittent reinforcement, where the reward is not guaranteed with each lever press, leads to more persistent behavior compared to continuous reinforcement. The unpredictability of the reward creates a sense of anticipation and increases the motivation to engage in the behavior, as the mice never know when the next reward will come. I’m not calling people mice, but… isn’t that the same with crypto?
This experiment has implications for understanding behaviors such as gambling, addiction, and even certain aspects of human social interactions that can be applied to our case. Getting a reward after years of agony, fear and loathing is that much sweeter than getting it all the easy way.
‘I Put My Life Savings In X Coin, It Is Over For Me’
Let’s stick to the drama, the vital element.
As the header suggests, I’m talking about episodes when someone claims bankruptcy because they put all their eggs in one basket, and sadly, those stinky eggs have turned into an omelette du fromage.
Sure thing, most people who scream ‘woe is me’ do it exclusively for attention and internet points, to get sympathy, or if they’re naive enough, a refund straight from the project’s CEO. You might have spotted those people in the wilderness of Twitter, and while there’s no actual way to accuse them of dirty lies, I’m having my doubts about them telling an absolute truth.
Some of you will find it hard to believe, but there are actual cases of people quitting their jobs to go all in on crypto. Take Abu Dhabi-based Jad Fawaz, who quit a real estate gig to enter the market when BTC was trading at around 50K.
“I’m nearly bankrupt. I’m laughing because there’s no point in exerting more depression and more frustration about it. I had about 40 coins and then I came down to 20 coins then I came down to 10 coins, came down to five coins and now I’m down to the last two coins, and it’s bitcoin and ripple XRP, so these are the last two coins and I will die before selling them.” – Fawaz told Reuters.
Sunk-cost fallacy at its finest, the phenomenon whereby a person is reluctant to abandon a strategy because they have invested heavily in it, even when it seems that abandonment would be better for their mental health. It’s not about the money too, the most valuable resource is still time.
Mama didn’t raise no quitter, eh? A lot of people are unwilling to write off a substantial amount of money as a loss, so they say ‘screw it, what’s a few more thousands’.
There’s a Ukrainian saying ‘гори сарай, гори і хата’ which can be loosely translated into “if a barn has burned down, then let the house burn too”. There comes a point in life when people who have suffered enough are simply unphased by what is happening around them.
And the only way out is to hope for a magical turnaround.
‘If I Sell Now, It Will Go Up Tomorrow’
We have all been there, haven’t we?
It’s bad enough to lose your life savings because of Dogecoin, but to see someone become a billionaire thanks to the meme coin the very next day… that is next level trauma.
I’m sure you have heard about ‘fear of missing out’, this idea that if you don’t jump in on the boat, you’re going to regret it for the rest of your life. If this coin goes to the moon, it would allow you to recover all the losses, and for crying out loud, even make a profit!
FOMO can make it challenging to quit crypto, as deep down we all want to believe that the future holds something nice for us and we just need to hold on a little longer for a positive outcome. Problem is, it is impossible to pinpoint the right moment to cash all your casino chips and ride away into the sunset.
If you haven’t seen the video called “He sold?” by Bizonacci, I strongly recommend you go and watch it now to understand the sentiment better.
So, to round it off, intermittent reinforcement, sunk cost fallacy, and no ability to time the market are only a few reasons that make crypto so hard to quit when you’re down. Human psyche is a complicated matter, and while you shouldn’t take my thoughts as truth in the last instance, I hope this blog post sparked a few thoughts in your mind and addressed a very real problem that might pick up some relevancy points in the near future.
Remember, every champ is a contender who refused to give up. Just don’t eat as many shots to the face as Rocky, because that would give you a technical knockout in 2023.
I’m talking about both sides of the crypto world in my personal blog too, so feel free to check my work there. Stay safu!