The most I’ve lost was around £300,000,” says 32-year-old equities trader Tomas*.
“That was over the course of a few weeks. The most I can remember losing in a single day? It must have been about £100,000. That was a bad day. I came out of the cinema with my girlfriend and saw that the market was tanking. I stopped dead in the middle of the street. My girlfriend made some comment about how I should have cashed out and I just threw my shopping bags in a rage. It was a full tantrum.”
Welcome to the highs — and lows — of life cresting the crypto wave. Around 2.3 million people in Britain now own some form of cryptocurrency and that figure rises every time there is a bounce in the value of Bitcoin. A whole new generation of investors is on the rise: last week, it was reported that the proportion of students investing in cryptocurrencies tripled in the space of a year, in response to the pandemic and an unstable job market, prompting concerns that they could lose money they can’t afford.
In the past few years the public appetite for investing in cryptocurrencies has reached fever pitch, with amateur investors pumping everything from life savings and house deposits to credit card loans into this particularly unpredictable market. Its instability is what makes it a thrill — but what also increases the risk.
In April, Bitcoin prices hit an all-time high (just over $64,000 — £46,000 — per coin), then halved in value almost overnight, only to rally again in May to a value of more than $40,000 (£28,000) per coin. It’s estimated that the value of the currency will reach record highs this year — and more and more companies, including WeWork and Lush, are accepting payments in Bitcoin.
But in January, the Financial Conduct Authority issued a warning outlining the various risks associated with investing in crypto. So what is the appeal, how much are these people making, and how easy is it to lose everything?
For years viral stories about vast fortunes being made, lost and made again have circulated. Take one legend centred on a Dutch family who bet their entire life savings on Bitcoin in 2017 — and bought more during a crash in 2018. In December 2020, they spoke to CNN, pointing out that while they have no property, pensions or liquid cash, crypto has bought them a five-star lifestyle of travel and leisure.
Jon, 29, who lives in Surbiton, found himself inspired by just these kinds of stories. He decided to invest half of the money he’d been given by his parents for a house deposit — “around £20,000” — into Bitcoin in early 2021. “I’ve lost a lot of it and now there’s no way I can buy a house. Obviously it doesn’t feel good. Sometimes I wake up in the night panicking about what I’ve done and worried that someone will find out. I’m too ashamed to tell my parents that I’ve just squandered all this money they worked so hard to give me.”
Despite this, he’s now considering investing more to try to break even. It’s this mentality that has led a number of gambling addiction charities to speak out on the dangers of cryptocurrency investment. Tony Marini, lead counsellor at the cryptocurrency addiction clinic at Castle Craig hospital in Scotland, has called it “the crack cocaine of gambling because it is so fast… It’s 24/7. It’s on your phone, your laptop, it’s in your bedroom.”
But for zealots, the appeal is the possibility to make huge sums of money quickly. Before Bitcoin, Eleanor*, a 30-year-old retail consultant for beauty brands, kept all her savings in a high-interest ISA. But when she found out her boyfriend was investing in crypto and making a profit from it, she decided to get involved too. “The most I made in a short space of time was about £8,000 from a £700 investment,” she says. “It is a bit like gambling — you can’t go to a casino and bet with a £10 note. You need the chips. When I buy coins, I’m buying chips, but I’m aware that I could lose it all.”
Despite that, she says that it feels worth the risk. “I never invest more than I could afford to lose. The most I’ve lost is about £17,000 but that’s only because I cashed out early after a coin was doing really well, so I never actually had the money. It was really depressing watching the price go up and up after I’d taken my money out, but that’s all part of the game and if anything, it has spurred me on to keep investing.”
She recently set up a WhatsApp group, initially for her friends, though it has now swelled to friends of friends — a group of around 50 women who all share crypto investment tips, gleaned largely from social media. No one has won or lost big — “probably a few thousand either way”, she says — but it has given the women a taste for investment. “We all invest in the same coins so when something tanks, there’s a number of us who are out of pocket and we can support one another.”
For many of its investors, cryptocurrencies are a form of revolution, a social media-powered financial system that serves as a necessary redistribution of power. Eleanor is one of them. “Traditionally, normal people could not participate in the creation of wealth via the financial markets,” she says. “Accessing the information and the means to do it was all too difficult. For the first time in history, someone like me can just get involved. I can create my own, private wealth. I can trade and influence the price of an asset. I think decentralized finance [or DeFi, the name for this new financial system] has the potential to create a fairer world.”
Sophie, 33, from Bow, agrees. She works in marketing for a London-based tech company and has “around £12,000” in her crypto wallet — spread across Ethereum, Bitcoin and a number of others. “I just put £350 into Etherum in 2017. By 2020, it was worth around £3,000 [the value has since dropped — “it’s now closer to £2,200”].
“How else could I have done that?” she asks. “Without access to a financial manager who can advise me on investments or stocks or portfolios, I’d be lost. Even the language puts people off, it’s designed to be opaque.” She uses the crypto app Coinbase. “It’s about time that normal people were given this kind of power.”
This anti-establishment sentiment is one of the reasons why so many have turned to crypto in recent years, says Dr Catherine Mulligan, a cryptocurrency expert and professor of computer science at the Instituto Superior Técnico at the University of Lisbon. “Bitcoin was created at the time of the banking crisis,” she points out. “There was a crisis of trust in the system and so the creation of privately-held pockets of wealth, which weren’t tied to governments or traditional banks, became quite attractive.”
The hardest part, Tomas tells me, is not necessarily when the market crashes but rather when it is soaring. “You see it going up and even though it’s unrealised wealth, you imagine what it would be like to have that money in your bank account.” He’s created a support group with a friend — an ex-trader who now exclusively works in crypto trading. They stop one another from cashing out when the market is doing well. “He has around £2 million in crypto — it’s his entire wealth, other than his flat. His wife says that he’s gambling with their future, but we both think it’ll keep going up.”
Their exit strategy involves either waiting until Bitcoin hits $100,000 per coin (“that would mean that the total value in Bitcoin would be equivalent to $2 trillion and for it to grow beyond that would be unlikely”) or to wait until their parents start investing. “Our parents know nothing about it at the moment. When the last people to join in the speculation start buying and talking about how much they’ve made, it’ll mean that there’s nobody else left to buy and it’ll start moving sharply down.” He doesn’t know when that’ll be exactly, “but it will happen. Everyone will do it at some point”.
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