What determines whether you’ll hang onto your crypto wealth and sanity?

Sudden Wealth Syndrome (SWS) refers to a type of psychological distress that arises from abruptly coming into large sums of money.

The America Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders does not mention SWS specifically. However, psychologists and psychiatrists tend to classify SWS as a form of identity disorder.

Wealth psychologist Stephen Goldbart coined the phrase in the 1990s, well before the advent of Bitcoin (BTC) and cryptocurrency, through his work with dot-com millionaires.

Goldbart’s work has also covered lottery winners, who are renowned for going from rags to riches, then back to rags once more. Indeed, this phenomenon is so commonplace it has its own terminology – the lottery curse.

In recent times, thanks to crypto, there’s a new breed of overnight wealthy. However, unlike the Silicon Valley dot-com millionaires, a significant portion of the crypto wealthy did not work 80+ hours a week to push technological innovation.

“There are now as many as 100,000 people who have $1 million or more stashed in bitcoin, according to the cryptocurrency data-tracking firm bitinfocharts.”

For those who fit that description, it was a case of the right place, right time, much like winning the lottery. But unfortunately, some suspect the ease with which wealth comes is a factor in the inability to retain it, and in the development of psychological disorders as a result of having attained it suddenly.

The lottery curse

Statistics compiled by the National Endowment for Financial Education show that 70% of lottery winners end up going broke. A combination of out-of-control spending, poor investment decisions, and in some cases, being the victim of fraud from trusted advisors/friends can spell trouble.

This finding is supported by an MIT study that looked at the effects of giving large sums of money to financially distressed people. Researchers found that rather than “learn their lesson,” subjects were still more likely to file bankruptcy than the average American.

Commenting on this study, Economist Jay L. Zagorsky said the money only got people into more trouble. In other words, money can be thought of as an amplifier for existing psychological conditions, such as poor money management.

“Studies found that instead of getting people out of financial trouble, winning the lottery got people into more trouble, since bankruptcy rates soared for lottery winners three to five years after winning.”

Like many lottery winners, the crypto wealthy are not immune to losing it all. Common accounts of crypto loss include scams, fraud, and losing access to wallets. But the most memorable instances center around the theme of “losing it” to volatility. That is, hanging on to tokens that subsequently tank after a run-up.

Perhaps the most well-known case of this is the story of Glauber Contessoto. He invested $250,000 into Dogecoin in February 2021 at $0.045. Following Dogecoin’s spike in April, Contessoto had unrealized gains amounting to $2 million. But in the belief it would climb higher, Contessoto hodled and we all know what happened next.

Sudden Wealth Syndrome challenges who you think you are

An often overlooked aspect of sudden wealth is the psychological impact on the individual.

Reported symptoms of SWS include emotional afflictions such as isolation from former relationships, the paranoia of losing the money, guilt, and general uncertainty or shock due to the unexpected windfall.

Seeking professional help will often lead to the diagnosis of clinically recognized conditions such as depression, anxiety, and insomnia. All of which present challenges to living a fulfilling life, even with the means to pay for whatever money can buy.

Identity refers to self-concept, which comprises our memories, experiences, relationships, and values. We acquire a sense of who we are over time based on these.

But when it comes to sudden wealth, Goldbart states this sense of who we are can sometimes get shaken. This is due to things like alienation from friends and family, who often become envious, thus impacting the relationship aspect of our identity. Similarly, overwhelming thoughts of being undeserving of the money call into doubt the individual’s values.

The suddenly crypto wealthy

Former four-time kickboxing world champion Andrew Tate posted a video recently in which he explained his grievances with crypto people.

While Tate doesn’t have the academic standing of (say)MIT, his experiences growing up on a Luton council estate to become a world champion and millionaire carry weight on the matter of going from rags to riches.

Tate says many who suddenly become crypto wealthy did not go through the struggles to warrant the money. This, he says, is detrimental, in that catching a sizeable crypto pump destroys work ethic to the point a normal job is no longer palatable.

“When I say they’re not prepared for wealth, they haven’t been through the struggle that’s going to allow them to become a man of caliber before they find money. They haven’t done the running to the fish stall, the running to the gym, getting punched in the face for money…”

Much like Zagorsky’s observations, Tate says money doesn’t change people’s inherent character, it merely acts as an amplifier. As he puts it, a dork is still a dork, albeit a rich one having acquired crypto wealth.

“Money is nothing more than an amplifier, money doesn’t change who you are. The problem with most of these crypto dorks is that they were dorks, and now they’re rich dorks. But they’re still a dork…”

Rounding off, Tate adds that the traditional paths to wealth, pre-crypto, taught people how to be a person of caliber. But sudden crypto wealth bypasses these lessons to leave some individuals akin to an unbalanced equation.

“If I’d made millions the old-fashioned way I’d have learned to negotiate, learn how to handle stress, learn how to work really hard, learn how to network, I’d have to learn so many things…”

Perhaps it is this insight that is the dominant factor in determining wealth retention and a balanced psychological state. Either way, it seems like the saying easy come, easy go has never been truer.

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