Home Leisure & Lifestyle Demystifying the Crypto Hype – The Psychological Factors Behind Crypto Investing

Demystifying the Crypto Hype – The Psychological Factors Behind Crypto Investing

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Over the past decade or so, digital currencies have emerged as one of the most popular investment venues on the market and a promising alternative to fiat money, causing notable shifts in the global financial system. The evolution of the Bitcoin price stands as proof of the staggering growth of the crypto industry and the increasingly important role it has come to play in people’s lives. With more than 9,000 active coins and over 420 million crypto users worldwide at the moment, we can safely say that the crypto hype is real.  

But there was a time when it was difficult to imagine that crypto could ever reach these heights. If we take a trip down memory lane, we can remember that not so long ago the concept proposed by Satoshi Nakamoto with the launch of Bitcoin was largely ignored by the media and the public and no one seemed interested in learning more about this innovative technology. And yet today, crypto is on the verge of mainstream acceptance, being embraced by average individuals, businesses and financial institutions alike. 

So, what happened in the meantime? How did people go from having little interest in this novel asset class to being completely obsessed with it? In order to find the answer to these questions, we need to take a look at the psychological factors that make digital currencies so incredibly appealing to such a large number of traders and investors. 

High volatility 

Volatility is not usually regarded as something positive, but it can serve as an incentive in the context of crypto investing. Since digital currencies are still in their infancy and they suffer the influence of a wide range of factors, they are bound to experience sharp and sudden price swings. You’d think that this should scare investors away but it appears to have the opposite effect instead. The fact that crypto can increase or decrease in value on any given day keeps things fresh and interesting. 

This is particularly appealing to the younger generation who accounts for the majority of crypto investments. Many Millennials, a.k.a. the instant gratification generation, seem to enjoy the thrill of investing in a fast-paced market where things change all the time, bringing the promise of substantial earnings. Compared to Bitcoin and the altcoin gang, traditional assets like stocks and bonds exhibit lower volatility, so there’s not as much action to keep investors on the edge of their seats. In many ways, crypto trading and investing resemble gambling. You shoot your best shot, but you can never be sure of the outcome. And just like gambling, investing in crypto can become addictive at some point. 

High return potential 

As you can see, everything is supersized in the world of crypto investments – the risks and the benefits. So, although crypto’s extreme volatility makes it a highly risky investment, it also provides the potential for equally high returns. By comparison, assets that are more stable can help investors earn a steady revenue over a longer period of time.

You might not get rich overnight by investing in digital currencies, but you have higher chances of making significant profits in a relatively short amount of time if you are clever or lucky enough to invest in the right asset at the right time. The possibility of becoming rich faster, without having to work hard or wait for decades to reap the rewards is more than enough to capture people’s attention and imagination.  

The appeal of innovation 

Digital currencies are without a doubt one of the biggest innovations of the century. They have changed our understanding of money, becoming a disruptive force in finance. The benefits of using cryptocurrencies as a means of exchange or store of value include fast and cost-effective transactions, decentralisation, transparency, diversity, inflation protection, ease of access and enhanced safety. Compared to crypto, traditional assets seem limited and outdated. 

What’s more, blockchain, the technology that powers digital currencies has taken a life of its own, driving transformation across a range of industries and sectors. There are those who say that blockchain represents the technology of the future due to its numerous applications and huge transformative potential. Therefore, getting into crypto seems like the natural thing to do for a lot of tech-minded individuals who have their sights set on the future. 

The magnetism of success stories 

Storytelling can be a powerful tool in any given context and crypto is a relevant example in this regard. You’ve surely heard success stories about people who invested in digital currencies when they were just starting out and then made tons of money when the market boomed. When people hear these anecdotes, they feel inspired to do the same.

It’s hard to resist a good story even if one has no connection to the characters. That’s because they give people hope by showing that success is attainable for everyone. In crypto’s case, these stories serve as an encouragement to take the leap despite the risks. After all, it takes courage to succeed in life.  


Building on the previous point, it can’t be denied that many people got rich or increased their existing fortunes by investing in crypto. Besides, despite the wild price swings experienced since their inception, digital currencies have maintained an upward trajectory. Although the market has changed a lot over the years and there’s no guarantee that cryptocurrencies will ever reach or surpass their previous highs, a lot of people still pour their money into crypto hoping this could help them build wealth. 

When everyone around seems to be jumping on the crypto bandwagon, it’s difficult to stand by and watch without doing anything. That’s when the fear of missing out (FOMO) on a good investment opportunity kicks in, prompting people to follow the crowd. 

Wrapping up 

There’s a combination of psychological factors at play that can explain crypto’s undeniable appeal as a store of value. Most of the time, people are not even aware of these aspects when they decide to invest in crypto. Given the circumstances, the crypto hype is probably going to continue in the foreseeable future.

Adam Mulligan , a psychology graduate from the University of Hertfordshire, has a keen interest in the fields of mental health, wellness, and lifestyle.

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