Surviving Crypto Volatility: Insiders Share Mental Health Tips for Investors

As global regulatory measures shape the evolving crypto sector, digital assets are emerging as alternatives to traditional investment tools. Despite reaching a historic peak valuation of over $3 trillion (around Rs. 2,51,89,440 crore), crypto assets remain volatile, relatively new, and largely unregulated. A single uninformed decision or unexpected event in crypto investing 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 about the importance of mental well-being for everyone.

In this article, we will examine the financial pressures faced by Indian investors, particularly during bear markets and amid uncertainties in the crypto sector. We’ll 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 revealed that 74 percent of India’s population feels pressured while managing personal finances and living costs. Additionally, 63 percent of Indians reported actively reducing their spending on non-essential or luxury items as of last year.

The potential for overnight gains from market fluctuations often entices investors to engage with 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 leave investors feeling anxious, leading them to frequently check the status of their assets. Even minor market fluctuations can trigger immediate stress.

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

In July, a hacking incident drained 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 distress among its user community. In the weeks following the attack, many users took to social media to express their anxiety about the situation, with some even threatening suicide due to fears of losing their investments. The situation escalated when WazirX advised individuals experiencing suicidal thoughts to contact the national emergency hotline.

User testimonies revealed a backlog of unpaid bills, as many individuals invested their savings into crypto trading in hopes of quick returns.

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

Guide for Investors

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 mitigate 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,” Patel said.

Before experimenting with larger investments, investors should first grasp the market dynamics through smaller investments. Only after familiarizing themselves with the step-by-step workings of crypto platforms and market sentiments 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 vision is key to achieving financial growth in crypto portfolios. There’s 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, a fundamental principle to remember is to only invest what you can afford to lose.” As per Vatsa, who manages global social communities for Web3 professionals, this risk-calculated approach could play a crucial role in minimising financial stress for the investor community.

Investors should be mentally prepared for potential liquidations at some point, as the crypto market is susceptible to the effects of various factors, from geopolitical tensions to macroeconomic trends and political decisions. Each significant and minor change can impact the market.

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

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