Crypto trading and cryptocurrency – how is the phenomenon visible in substance abuse prevention?

How is crypto trading as a phenomenon visible in research and in client work both in the social welfare and health care sector and volunteering activities? This page provides a brief overview of crypto trading and the similarities between crypto trading and gambling. On this website, crypto trading refers to the purchase and exchange of different cryptocurrencies (such as Bitcoin) and the common short-term and long-term trading of cryptocurrencies.

Cryptocurrency in brief

A cryptocurrency is a digital virtual currency based on cryptography. The most well-known of these currencies is Bitcoin, which was created in 2008 and entered the market in 2009. There are several hundred different alternative currencies called altcoins. The value of cryptocurrencies is determined by demand and supply and is also affected by the maximum supply of that currency (for example, Bitcoin’s is 21 million), the circulating supply and the possible costs of mining the currency. Mining refers to the blockchain’s maintenance work, which is described in more detail in the next paragraph.
Cryptocurrencies utilise blockchain technology, which enables different parties in the blockchain to create and maintain different decentralised and shared databases. In practice, a blockchain distributes the information stored in it to numerous different servers, that is, nodes. This means that even if one node closes, others will continue to maintain the chain and process the data. In other words, blockchains record transactions, that is, act as a kind of a bank.

Virtual currency investing, legality, and taxation

The most common way of acquiring cryptocurrency is to buy them from various online cryptocurrency exchanges, such as Coinbase. Generally, the age limit for using cryptocurrency exchanges is 18. Cryptocurrencies can be bought with different currencies and by trading one cryptocurrency for another. The legality of cryptocurrencies varies by country. In many countries, they are either legal or not separately found illegal. For example, China’s central bank has declared cryptocurrency trading illegal, while El Salvador has accepted Bitcoin as a legal tender.

In Finland, virtual currency is defined in the money laundering directive and does not have the same legal status as a currency or money. Currently, value creation in virtual systems is not within the scope of the Financial Supervisory Authority or any other regulatory control.

The Tax Administration has also prepared guidelines on the taxation of virtual currencies.

Cryptocurrencies have been a very prominent topic of discussion at the European Union. In 2022, the European Parliament approved the regulation on markets in crypto-assets (MiCA), which increases regulation in the crypto space and restricts, among other things, the operations of private cryptocurrency exchanges.

Crypto trading and gambling

The similar characteristics of crypto trading and gambling have recently emerged in discussions in social welfare and health care services, in the field of gambling-related harm prevention and among researchers.

The Finnish Association for Substance Abuse Prevention EHYT became interested in the phenomenon through identifying weak signals that suggest that trading has in some cases taken a place alongside gambling or replaced it. Both phenomena—gambling and crypto trading—are also perceived as similar.

Crypto trading may resemble fast-paced high-risk gambling, produce a feeling of pleasure, adrenaline and excitement, and provide escape from everyday life. Crypto trading can cause harm, and it can develop into addiction like gambling or appear alongside another addiction. Therefore, crypto trading can be risky especially for those who have a gambling problem.

What does research and practice tell about the phenomenon?

Research related to the shared characteristics of crypto trading and gambling has attracted interest both in Finland and internationally, but there is still little research data available for the time being. In early 2022, EHYT, in cooperation with the Sosped Foundation, collected information on experiences concerning crypto trading from Finnish crypto traders, from social welfare, health care and other professionals encountering them and from those participating in volunteering activities.

In addition to questions concerning crypto trading, the survey asked about the relationship between crypto trading, gambling, and investing in stocks. A total of 137 people responded to the survey, most of whom were men (79%).

The results of the survey highlight the similarity between crypto trading and gambling.

Of the traders who responded to the survey (120 people)

45% do not gamble

27% gamble less often than every month

18% gamble 1–3 times a week

7% gamble once a week

4% gamble daily or several times a week

Of those who responded to the survey

57% spent less than two hours a week on trading

23% spent 2–7 hours

0.8% spent over 60 hours

The majority spent 201–500 euros (19%) or more than 2001 euros (18%) on trading per month. 14% spent 0.01–5 euros per month on trading.

As a result of trading, 3% of the respondents had incurred a lot of debt, 8% had incurred some debt and 77% had incurred none. Many respondents were actively monitoring what is happening in the crypto space, and some also had a plan for cashing in their profits.

When asked about the advantages of trading, respondents said that the phenomenon is interesting and offers a challenging learning curve, a possibility to make a profit quickly and an opportunity to follow how the blockchain technology and cryptocurrencies may solve problems related to traditional money markets. When asked about the disadvantages of trading, the respondents brought up rapid fluctuations in the market and the resulting possibility of major losses, stress related to investing and keeping up to date, high risks and losing control of their trading activities.

Some respondents saw similarity between crypto trading, gambling, and investing in stocks. They were associated with excitement, addictiveness, risks, and the possibility of major losses. On the other hand, some of the respondents did not see similarities, but said that each had their own characteristics.

Crypto trading has begun to be visible in dialogic client work – discussion is needed

In the survey conducted by EHYT and the Sosped Foundation, professionals and volunteers were also asked whether they had encountered crypto trading in their work. 17 (12%) professionals/volunteers who had encountered the phenomenon in their work and activities responded to the survey. Almost half of professionals (47%) began to see the phenomenon in 2021. The phenomenon is still new and has only recently come to the attention of social welfare and health care professionals.

Purchasing cryptocurrencies at a high price and the necessity to sell them at a low price, among other things, were seen as disadvantages of trading. According to the respondents, traders also hide their trading from friends and relatives, and getting addicted to it is easy. Trading was perceived to have similarities with gambling.

Short-term trading at least seems to be very similar to regular gambling. The size of losses incurred at one time can be much larger than in regular gambling. Short-term trading seems to cause similar addiction. In longer-term trading, the risks are lower because increasing the value of the purchased currency and making a profit requires patience

– professional/volunteer

The professionals and volunteers who responded to the survey needed more information on crypto trading as a phenomenon and the potential risks associated with it. Respondents felt that they also needed more information on whether the person’s other problems and addictions would expose them to trading. Professionals also need help in bringing the matter up for discussion and information on where help is available if trading has become a problem for a person.

Traders encountered in Peluuri and Pelirajaton activities

The crypto trading phenomenon has emerged in dialogic services for those with a gambling problem, such as Peluuri and the Sosped Foundation’s Pelirajaton peer support activities. According to Peluuri’s Peli Poikki online therapist, the phenomenon has been visible to some extent but still to a minor degree. Trading has either become a new addiction after a gambling problem or has coexisted with gambling. Trading started to become visible in problem gambling work a few years ago in both Peluuri and Pelirajaton activities.

About 1.5–2 years ago, crypto trading began to appear during talks with clients, and now it seems to appear slightly more often. Some people talked about it and had thought about it even if they had not traded.

– Peluuri client worker

Trading has been discussed in client and peer support activities either of the client’s own volition or when asked about other addictions. People are looking from trading the same feeling they get from gambling. Sometimes the reason for trading is leaving the root cause untreated.

For all of these people, gambling has in a way ‘run its course’, and leaving the root cause untreated has in a way been the transition. In other words, the player has the intention of quickly getting more money. The amount x is not enough for everything and should be increased to the amount y

– Pelirajaton peer support counsellor

Gambling and trading are perceived to have both similarities and differences. Similarities include the possibility to trade rapidly and take risks. Among gamblers, trading can be perceived as an acceptable and interesting activity that requires an understanding of the trading environment. Monitoring investments is easy to incorporate into a person’s everyday life, and successes fuel trading in the same manner as they do in gambling.

At first, the player does not see this as comparable to gambling, as this is investing and thus an acceptable activity. External funding is used if it is possible, and the player can also justify its necessity to themselves. In addition, this phenomenon is found to be sufficiently fast paced, such as playing at casinos

– Pelirajaton peer support counsellor

A client worker from Peluuri and a Pelirajaton peer support counsellor both feel that it is a good idea to ask about trading and bring it up in a manner that players understand what is being talked about. The matter can be approached as a behavioural addiction. Trading can be discussed with the player in small steps so that they can notice similarities between trading and gambling.

Crypto trading is now also considered at the application stage of Peluuri’s Peli Poikki programme.

The Peli Poikki programme’s application stage was reformed in July 2022, and it now includes a separate question on whether stock trading or crypto trading has caused problems for the client. The question also maps other behavioural addictions

– Peluuri client worker

Studies, surveys, and experiences would indicate that crypto trading is a phenomenon that should be monitored by gambling problem actors and researchers.  

Researchers are interested in crypto trading and gambling

The relationship between crypto trading and gambling is also of interest in the field of research.

A survey conducted in Finland in 2022 examined the monthly regular investing, real-time stock trading and crypto trading of persons aged 18–75 years (N=1530). Of the participants in the study, 22% were regular investors, 3% were real-time stock traders and 4% were crypto traders. Crypto traders were more likely to have an immigrant background and to have taken small short-term loans. Crypto traders reported higher levels of excessive gambling, psychological distress, stress, mental health problems and loneliness. 5% of the respondents reported an increase in gambling and 3% an increase in crypto trading during the coronavirus pandemic (March 2020–April 2021).

The relationship between crypto trading and gambling has also been examined in international research. A study conducted in 2019 examined crypto trading among gamblers. The study found that crypto trading is linked to the severity of problem gambling.

A study published in 2021 found that crypto traders are highly likely to play several different gambling games and get higher scores in the Problem Gambling Severity Index (PGSI).

A South Korean study (2020) found that Bitcoin investors reported more excessive gambling than stock investors. An on-going international study examining the behaviour of crypto traders describes crypto traders as having similar behaviour models as gamblers, such as false beliefs and excessive self-confidence.