Crypto is no stranger to depressions, having experienced four major losses since the end of 2017.

Brian Hourigan is a New York-based real estate executive who prides himself on a portfolio of assets with modest but predictable returns. However, with the hitting record highs last fall, the 38-year-old uncharacteristically made a risky bet.

Hourigan invested $20,000 in bitcoin and ether in October, hoping to accelerate his plans to an apartment. He was inspired by: Adam Ghahramani, a close friend and cryptocurrency entrepreneur who made a fortune in digital tokens and has been passionate about the industry for many years.

“I allow Adam’s long-term and particularly optimistic enthusiasm for the state of cryptocurrencies to have a huge impact on my judgment,” said Hourigan, whose cryptocurrency investments have lost about half their value as digital assets tumbled this year.

Cryptocurrencies are no strangers to depressions, having experienced four major losses since the end of 2017. But as the coin gained more mainstream traction during last year’s bull run, more and more people are the pain of the latest crash — many of whom caught crypto mistakes from those closest to them . This has led to some awkward conversations at dinner parties and gatherings around the world.

“Brian likes to give my outdated investment advice at parties,” said Ghahramani, 39, who manages Untamed Elephants, a charitable NFT community. “At his most recent 4th of July event, I became a joke about my genius crypto strategy.”

Cryptocurrencies have lost nearly $2 trillion in value since Bitcoin peaked in November. Over the past two months, billions of have been lost as several crypto companies, as well as a prominent hedge fund, imploded. Even after Bitcoin’s roughly 50% drop this year, many cryptocurrency supporters— or others—have made sizable profits, compounding the psychological losses heading into the peak. People who bought tokens two years ago would have more than doubled their money. Investing at the bottom of the 2018 bear market will yield returns of over 600%.

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Personal relationships are the key driver behind the inflow of new money into cryptocurrencies. Three-quarters of investors under the age of 40 said competition with friends, family and acquaintances motivated them to put money into risky products such as cryptocurrencies, according to a survey released in October by Britain’s financial regulator.

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“Many of my clients were initially introduced to cryptocurrency through family, friends or colleagues,” said Aaron Sternlicht, a New York-based therapist who specializes in cryptocurrency trading addictions. “Their family or friends may be the catalyst for their investment decision, but not necessarily the only force involved in putting their money into cryptocurrencies.”

For most of their existence as an asset class, buying digital tokens was not as simple as opening a stock trading account at your bank. That began to change after companies like PayPal Inc., Block Inc., Revolut and Robinhood Markets Inc. began allowing customers to buy digital coins on their platforms in recent years, paving the way for millions of investors to enter cryptocurrencies path of.

According to CryptoQuant, the 30-day average number of active Bitcoin addresses surged 52% from March 2020 to nearly 1.2 in April 2021. As the cryptocurrency plummeted this year, the number of addresses dropped below 900,000.

‘Every Crypto-Bro cliché’

“There was broader speculative enthusiasm in the last rally — no matter what happens, you can’t go wrong,” said cryptocurrency advisor Colin Platt. “It’s not just about focusing on friends and family, it’s seeing Friends and family are doing great and thinking that everything will be fine everyone’s music stops.”

Eric Sumner, a 30-year-old public relations manager in Tel Aviv, said he persuaded his engineer friend Andrew Deen to invest in bitcoin by citing “all the clichés about cryptocurrencies in the book.”

“‘Think about how many people were using the internet in the ’90s,'” Sumner said he told Dean. “‘It’s actually less than 10% of the total global population. If bitcoin and ethereum even approach 15% of the world in the next few years, we’re millionaires.'”

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Things didn’t work out that way. Dean, who lives in Silver Spring, Maryland, invested $4,000 in Bitcoin, Cardano, Ethereum and Dogecoin between February 2021 and July 2021. He estimates that his crypto portfolio is down 80% to 85%.

“Eric’s words made me think, ‘If I don’t get to the bottom, I might lose my chance,'” Deen said. “The prospect of getting rich quick is a big lure.”

eager to take risks

Cryptocurrencies were one of the beneficiaries in early 2020 as the Covid-19 outbreak prompted unprecedented stimulus from central banks and governments. Ultra-easy liquidity, coupled with savings from reduced government relief and travel spending, has spurred an influx of risk assets that will continue through the end of 2021.

After more than a decade of low inflation, rising consumer are the central bank’s concern. As the Fed began to pivot, so did cryptocurrency investors: After peaking near $69,000 in early November, Bitcoin and the broader cryptocurrency complex began a rapid slide.

In March 2021, Anastasia Chambers, a 31-year-old student from Carson City, Nevada, gave her brother Alexander $1,000 to invest in cryptocurrencies. Her portfolio is down about 60%. Their mother, Claudia, a 63-year-old retired legal secretary living in Reno, gave Alexander $5,000 to buy digital tokens. Her investments fared better, down about 15%.

Alexander, who works as a content strategist at Geode , a decentralized finance project, was relieved he didn’t force his sister and mother to invest more than they could afford to lose.

“I live in Nevada, so I’m used to people being reckless about money,” Alexander said. “In some ways, investing in cryptocurrencies is not very different from going to a overnight, especially for those who think they will beat the odds. You have to understand what you are investing in, and even then there is no guarantee that you will. stand out.”

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