COVID lockdowns drove a dramatic rise in cryptocurrency investments, prompting warnings around heightened risk-taking among isolated individuals.
QUT researchers, studying prolonged social isolation and increased risk-taking, found the price of Bitcoin rose by 700 percent between March 2020 and March 2021.
Dr Thusyanthy Lavan said the study found “perceived stress” played key role in riskier behaviours during prolonged social isolation.
Dr Lavan said the study’s results had major implications for financial advisors, marketers and policymakers on how to curb excessive risk-taking among isolated individuals.
She said the QUT team looked at the impact of the pandemic’s prolonged enforced social isolation coupled with economic instability that drove risk-taking behaviour, particularly in cryptocurrency investment.
“At the beginning of the pandemic, in January 2020, market capitalisation of these online currencies was about $191 billion, but had surged to $769 billion by December 2020,” Dr Lavan said.
“This shift is underscored by the significant increase in the Bitcoin price, up 700 per cent from March 2020 to March 2021.”
Dr Lavan said the attraction of high-risk investments could be linked to their perceived potential for high returns during times of economic instability and market volatility.
“A further factor might be people’s tendency to try to reinstate some control in their lives and gravitate toward more autonomous and seemingly empowering activities, such as trading in cryptocurrencies.”
Co-lead researcher Professor Brett Martin said a survey conducted in December 2022, during a lockdown period in Australia, of 216 participants screened for awareness of, and familiarity with cryptocurrency, but who were not current investors.
“By focusing on potential future investors, we aimed to capture unbiased perceptions and insights into cryptocurrency investment decisions,” Professor Martin said.
“Our survey sought to identify how three psychological constructs – perceived stress, sense of control and neuroticism – might underlie the relationship between social isolation and risk-taking behaviour.”
Professor Martin said analysis of the results showed that perceived stress, rather than a sense of control or neuroticism, played a key role in driving risk-taking behaviours during periods of social isolation.
