Surviving Crypto Volatility: Insiders Share Mental Health Tips for Investors

As global regulatory measures shape the evolving crypto sector, digital assets are emerging as an alternative to traditional investment vehicles. Despite reaching a historic peak valuation of over $3 trillion (approximately Rs. 2,51,89,440 crore), crypto assets remain volatile, relatively new and largely unregulated. A single uninformed decision or unexpected event when investing in cryptocurrency can lead to significant financial losses and severe mental stress. This raises the important question: what can investors do to protect themselves from such situations?

World Mental Health Day, observed annually on October 10, was established in 1992 by the World Federation for Mental Health (WFMH) to raise global awareness of the importance of mental well-being for all.

In this article, we will explore the financial pressures faced by Indian investors, especially during bear markets and amid uncertainties in the crypto sector. We will also explore decision-making strategies that can help investors avoid financial stress in such challenging times.

State of stress among crypto investors

In 2023, a PwC report found that 74 percent of India’s population feels pressured in managing personal finances and living expenses. Additionally, 63 percent of Indians reported that they had actively reduced their spending on non-essential or luxury items last year.

The potential for overnight profits from market swings often entices investors to dabble in crypto assets. However, a lack of proper investment knowledge can lead to significant losses of hard-earned money.

Speaking to Gadgets360, Edul Patel, CEO of crypto investment platform Mudrex noted that unlike traditional investment platforms, the crypto trading market operates 24/7. This constant availability can make investors feel anxious, requiring them to regularly check the status of their assets. Even small market fluctuations can cause immediate stress.

“Entering the crypto market can be overwhelming, especially during periods of high volatility,” Patel said. “It’s easy to get caught up in the emotions of market fluctuations, but what’s crucial is maintaining focus on long-term goals.”

In July, a hacking incident extracted over $230 million (approximately Rs. 1,900 crore) from the wallet of India’s WazirX crypto exchange. In response, WazirX suspended trading and withdrawal services, causing unrest among the user community. In the weeks following the attack, many users took to social media to express their concerns about the situation, with some even threatening suicide for fear of losing their investments. The situation escalated when WazirX advised those with suicidal thoughts to contact its national emergency hotline.

User testimonials revealed a backlog of unpaid bills as many people invested their savings in crypto trading hoping for a quick return.

The incident provided a stark illustration of how financial setbacks can lead to significant mental distress, prompting some people to consider drastic and catastrophic decisions.

Investors Guide

Crypto analysts consistently advise investors against relying solely on cryptocurrencies for their investments and savings. Instead, cryptocurrencies should be viewed as tools for diversifying investment portfolios.

“Diversifying investments can help limit risk, while disciplined strategies like HODLing can keep investors grounded through the turbulence. Staying informed and making decisions based on research rather than emotion will also help manage uncertainty ” said Patel.

Before investors start experimenting with larger investments, they should first understand the market dynamics through smaller investments. Only after familiarizing themselves with the step-by-step mechanics of crypto platforms and market sentiment should they consider allocating larger amounts to relatively stable assets.

Experts from India’s crypto trading desks unanimously agree that market volatility is temporary; maintaining a long-term view is key to achieving financial growth in crypto portfolios. There is no need to rush into buying or selling assets in the 24-hour market; a practice that, if left unchecked, can lead to anxiety and stress.

Speaking to Gadgets360, Hashtag Web3 founder Vedang Vatsa said: “Given the high volatility of crypto markets, it is a fundamental principle to remember to only invest in what you can afford to lose.” According to Vatsa, which manages global social communities for Web3 professionals, this risk-calculated approach could play a crucial role in minimizing financial stress for the investment community.

Investors should mentally prepare for possible liquidations at some point as the crypto market is sensitive to the effects of various factors, from geopolitical tensions to macroeconomic trends and political decisions. Any significant and minor change can impact the market.

“The underlying risks are so high that any level of leverage without a hedge will always result in financial losses. If someone wants to make money consistently, they should look at an implied volatility curve and take longer positions, with minimal leverage. ”, conveyed Ganesh Mahidhar from the Further Ventures investment team to the new investors via Gadgets360.

Furthermore, crypto investors are strongly encouraged to only contact select FIU-compliant platforms in India for their investments as this practice provides a better legal recourse. Implementing two-factor authentication and regularly updating passwords are essential steps to improve security. Additionally, using offline cold wallets instead of internet-connected hot wallets can help protect against hacking attempts and potential losses.