Researchers from the Queensland University of Technology (QUT) have found that social isolation during the COVID-19 lockdowns led to a 75% increase in cryptocurrency investments.
The stress of being isolated from others and the economic uncertainty of the pandemic were key factors driving this surge.
The study, titled “Social isolation and risk-taking behavior: The case of COVID-19 and cryptocurrency,” was published in the Journal of Retailing and Consumer Services.
Dr. Thusyanthy Lavan and Professor Brett Martin from QUT’s School of Advertising, Marketing, and Public Relations, along with colleagues from overseas, investigated how the pandemic influenced people’s interest in cryptocurrency.
Dr. Lavan explained that the team examined how prolonged social isolation and economic instability during the pandemic encouraged people to take more financial risks, particularly in cryptocurrency.
At the beginning of the pandemic in January 2020, the market capitalization of cryptocurrencies was around $191 billion.
By December 2020, this had skyrocketed to $769 billion. This increase was highlighted by the dramatic rise in Bitcoin’s price, which went up by 700% from March 2020 to March 2021.
The researchers believe that the attraction to high-risk investments like cryptocurrency can be linked to their potential for high returns during uncertain economic times.
Additionally, people may have been drawn to cryptocurrency trading as a way to regain a sense of control and autonomy in their lives during the lockdowns.
Dr. Lavan and Professor Martin wanted to understand the broader psychological responses to social isolation that led to these changes in consumer behavior.
They noted that previous research had shown that social isolation could lead to risky behavior in non-purchase situations, such as sharing personal information on social media. However, this study was one of the first to explore risky purchasing behavior, specifically in cryptocurrency investment.
To gather their data, the researchers conducted a survey in December 2022 during a lockdown period in Australia. They surveyed 216 participants who were aware of cryptocurrency but were not current investors.
By focusing on potential future investors, they aimed to capture unbiased perceptions and insights into cryptocurrency investment decisions.
The survey aimed to identify how three psychological factors—perceived stress, sense of control, and neuroticism—might influence the relationship between social isolation and risk-taking behavior.
Perceived stress is a personal interpretation of stress that a person feels is beyond their ability to cope with. Sense of control reflects a person’s belief in their ability to influence events and outcomes in their life. Neuroticism is a tendency to experience negative emotions such as anxiety and impulsiveness.
The analysis of the survey results showed that perceived stress was the main driver of risk-taking behaviors during periods of social isolation. This was more significant than a sense of control or neuroticism.
Professor Martin emphasized that the research was not intended to criticize cryptocurrency. He noted that previous research had shown positive effects of cryptocurrency investing on people’s lives. Instead, this study focused on how lockdowns and isolation-induced risk-taking behaviors could provide insights into developing better support strategies for vulnerable populations.
The research team included Dr. Lavan, Professor Martin, and Professors Weng Marc Lim and Linda Hollebeek from Sunway University, Malaysia.
Their findings have significant implications for financial advisors, marketers, and policymakers on how to curb excessive risk-taking among isolated individuals during times of crisis.
