COVID-induced social isolation drove cryptocurrency investment up 75%

Lockdowns through the COVID-19 pandemic noticed an exponential rise in cryptocurrency investments which was partially pushed by the stress of social isolation, QUT researchers have discovered.

The examine’s outcomes have main implications for financial advisors, entrepreneurs and policymakers on methods to curb extreme risk-taking amongst remoted people.

The article, “Social isolation and risk-taking conduct: The case of COVID-19 and cryptocurrency,” was printed within the Journal of Retailing and Client Companies.

Dr. Thusyanthy Lavan and Professor Brett Martin, from the QUT Faculty of Promoting, Advertising and Public Relations, with abroad colleagues, studied the buyer curiosity in cryptocurrency through the pandemic.

Dr. Lavan mentioned the crew appeared on the impression of the pandemic’s extended enforced social isolation coupled with financial instability that drove risk-taking conduct, significantly in cryptocurrency funding.

“Firstly of the pandemic, in January 2020, market capitalization of those on-line currencies was about $191 billion however had surged to $769 billion by December 2020,” Dr. Lavan mentioned.

“This shift is underscored by the numerous improve within the Bitcoin value, up 700% from March 2020 to March 2021.

“The attraction of those high-risk investments could possibly be linked to their perceived potential for prime returns throughout occasions of economic instability and market volatility.

“An extra issue is likely to be individuals’s tendency to attempt to reinstate some management of their lives and gravitate towards extra autonomous and seemingly empowering actions, corresponding to buying and selling in cryptocurrencies.

“With this in thoughts, our intention was to search for the broader psychological responses to social isolation that catalyzed these modifications in shopper decision-making, significantly in adopting new, and doubtlessly riskier behaviors.

“Earlier analysis has established the direct results of social isolation on risk-taking conduct in non-purchase conditions corresponding to sharing of non-public info on social media, however this is without doubt one of the first research to look at dangerous buy conduct.”

Professor Martin mentioned they carried out a survey in December 2022 throughout a lockdown interval in Australia of 216 contributors screened for consciousness of and familiarity with cryptocurrency however who weren’t present buyers.

“By specializing in potential future buyers, we aimed to seize unbiased perceptions and insights into cryptocurrency funding selections,” Professor Martin mentioned.

“Our survey sought to establish how three psychological constructs—perceived stress, sense of management and neuroticism—may underlie the connection between social isolation and risk-taking conduct.

“Perceived stress is a private interpretation of stress relating to a state of affairs in an individual’s life they contemplate to be past their adaptive capacities, whereas sense of management displays an individual’s perception of their potential to affect occasions and outcomes of their life.

“Neuroticism is a bent to expertise unfavorable emotional states corresponding to anxiousness and impulsiveness.

“Our evaluation of the outcomes confirmed that perceived stress, moderately than a sense of control or neuroticism, performs a key function in driving risk-taking behaviors during times of social isolation.

Professor Martin mentioned the researchers weren’t criticizing cryptocurrency.

“To be clear, my not too long ago printed analysis has proven how the method of cryptocurrency investing can have a constructive impact on peoples’ lives.

“On this mission, we appeared on the impact of lockdowns and isolation-induced risk-taking. This analysis can present insights on creating higher assist methods for susceptible populations.”

The analysis crew comprised Dr. Lavan, Professor Martin, and Professor Weng Marc Lim and Professor Linda Hollebeek from Sunway College, Malayasia.