QUT researchers found that lockdowns during the COVID-19 pandemic led to an exponential increase in cryptocurrency investments, due in part to the stress of social isolation. The study’s findings have important implications for financial advisors, marketers, and policymakers on how to prevent excessive risk taking among isolated individuals.

The article “Social Isolation and Risk Behavior: The Example of COVID-19 and Cryptocurrency” was published in the Journal Retailing and Consumer Services.

Dr Tusyanti Lavan and Professor Brett Martin from QUT’s School of Advertising, Marketing and Public Relations, together with colleagues overseas, researched consumer interest in cryptocurrency during the pandemic. Dr Lavan said the team looked at the impact of the pandemic’s prolonged forced social isolation and economic instability, which had encouraged risk-taking behavior, particularly around cryptocurrency investments.

“At the beginning of the pandemic, in January 2020, the market value of these online currencies was approximately $191 billion, but by December 2020 it had risen to $769 billion,” Dr. Lavan said.

“This change is highlighted by the significant increase in the price of Bitcoin, which increased by 700% between March 2020 and March 2021.

“The attractiveness of these high-risk investments can be attributed to their perceived high return potential during periods of economic and market volatility.

“An additional factor may be the tendency for people to try to gain some control over their lives and turn to more autonomous and seemingly empowering activities, such as cryptocurrency trading.

“With this in mind, our aim was to find these changes in consumer decision-making, specifically the broader psychological response to social isolation that catalyzes the adoption of new and potentially riskier behaviours.

“Previous research has revealed the direct impact of social isolation on risky behavior in non-shopping situations, such as sharing personal information on social networks, but this is one of the first studies to examine risky purchasing behavior.”

Professor Martin said that during the lockdown in Australia in December 2022, they conducted a survey of 216 participants who were tested for awareness and familiarity with cryptocurrency but were not current investors.

“By focusing on potential future investors, we aimed to gain an unbiased perception and understanding of cryptocurrency investment decisions,” Professor Martin said.

“Our survey sought to determine how three psychological constructs—sense of stress, sense of control, and neuroticism—may underlie the relationship between social isolation and risk-taking behavior.

“Perceived stress is the personal interpretation of stress associated with a situation in one’s life that one considers to be beyond one’s abilities to adapt, whereas a sense of control reflects one’s belief in one’s ability to influence events and outcomes in one’s life.

“Neuroticism is a tendency towards negative emotional states such as anxiety and impulsivity.

“Our analysis of the results showed that perceived stress, rather than feelings of control or neuroticism, plays a significant role in leading to risky behavior during periods of social isolation.

Professor Martin said the researchers were not criticizing the cryptocurrency.

“To be clear, my recently published research has shown how the process of investing in cryptocurrency can have a positive impact on people’s lives.

“In this project, we looked at the impact of quarantine and the risk posed by isolation. This research can provide insights into the development of better support strategies for vulnerable populations.”

The research team included Dr. from Sunway University in Malaysia. Lawan, Professor Martin, Professor Weng, Mark Lim and Professor Linda Hollebeek.