“I lose all my life savings. He had bought Luna for $85. I am not sure what to do. I lost about $5000, could be [a] small amount for some, but it was all he had. Can someone please advise what I should do next!?” another forum member wrote.
According to Debbie Smyth, senior financial adviser at Wesley Mission, the number of Australians experiencing financial difficulties after investments have failed is likely to increase in the future.
“Many young people are looking to retire early. I think it’s a generational thing: They look at their parents and say, ‘After all these years of working, all you have is the house you live in,’” she says.
“The younger generation is very motivated towards how they can improve financially more quickly.”
The trading platform eToro estimates that a quarter of investors aged 18 to 34 have at least 10 percent of their portfolios in cryptocurrencies. The claim is based on a survey of 1,000 investors in March.
Respondents said they believe cryptocurrencies offer a store of value, a hedge against inflation, and the ability to generate strong returns.
Smyth says that while financial difficulties related to investing are not yet a major issue, he is seeing more cases of people starting to invest in crypto on the word of friends or online referral networks.
“Seeing how society develops, everyone wants something as fast as possible. But it does not work.
‘Shame comes later’
Days after the crash, social media forums populated by moon investors showed a mix of camaraderie, sad reflection, hope and anguish.
Surfers Paradise investor Vasa Fedorow lost $15,000 on Terra Luna. He’s glad it wasn’t more.
“I have about $60,000 worth of crypto right now, so [the $15,000 loss] it’s still a reasonable portion, especially considering he wasn’t planning on holding out for quite some time. In the end I got a bit greedy, to be honest with you I hung in there too long,” says the 23-year-old software developer.
He bought the token in December last year after watching a video by prominent American YouTuber Alex Becker about it.
“I just didn’t think it would go to zero,” says Fedorow. “I knew a little relegation was coming, that was my point of view. It was supposed to be pegged to the dollar… It was supposed to be a stable currency.”
Another Australian investor, who asked to remain anonymous, says he had $16,000 on the moon.
“I think it’s now worth about $6. But I’m well diversified and not too worried about it. That’s what crypto is to me: a volatile market with a huge opportunity for disruption.”
Those who agreed to speak with The Australian Financial Review they were content to view the crash as a learning experience.
But the pain suffered by those who lost large amounts of money cannot be discounted, says Dr. Zena Burgess, head of the Australian Psychological Society.
“It’s about people’s basic need for survival and safety,” says Burgess. “It’s one of those really important [traumatic events] that really affect people. It impacts them in the same way that the death of an important family member would because they lose control, and they don’t know what to do when that happens because all of their best planning has been taken away.
“The most immediate response is just fear: fear of the future and fear of what is going to happen. The stress, anxiety and depression that come with not knowing what to do. The shame comes a little later.”
The Terra Luna Reddit forum’s idea of pinning mental health hotlines to the top of the page was a good one, he adds.
“Trying to alert people to mental health care right now [is good] because their way of thinking is not as clear as it normally would be,” he says. “It’s good to treat these mental health issues early on, so they can start to rethink what they’re going to do.”
High Help Requests
In the years since the pandemic began, psychologists have seen a high number of requests for support, says Burgess.
Partly due to the destigmatization of mental health, but also due to the combination of financial, health and lifestyle changes.
“When you have something like severe financial loss, it’s the pain of what happened and the confusion, like ‘This wasn’t supposed to happen.’ So it’s about working, ‘How do I deal with it? And how do I talk to my partner about it? How do I talk to my friends about it?’”
She suggests that investors, before investing in a volatile asset, take a moment to write down the different possibilities that investment could generate.
“It’s all that planning: if it goes really well, what will happen? If it goes half well, what will happen? And if it goes horribly wrong, what will it mean to you?
“Do some research before you make a decision, and I would say that to anyone about any big decision in life.”
And for those who are experiencing financial difficulties, Smyth of Wesley Mission recommends that they contact a financial advisor. The service is free, but it is only available to people experiencing difficulties.
The worst thing they can do is bury their heads in the sand and hope things will just get better or borrow more money.
“People often view financial difficulties short-sightedly. They think, if I can get through this period of time… I can get to the other extreme, and often that’s not the case,” she says.
Instead, asking for help earlier means there are more options.
Financial advisors will work with their clients to achieve their goals by reviewing their budgets, negotiating with creditors, setting payment moratoriums and creating financial recovery plans, she says.
Burgess adds that it helps investors remember that if they’ve made money before, they can again, once they get back on their feet.
“Don’t focus on what you’ve lost and think about what you still have [can help]. What can you build from there? Burgess says. “You had the money to invest in crypto, so you did it once. How can you use the skills you have to start rebuilding?
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