‘They couldn’t even scream any more. They were just sobbing’: the amateur investors ruined by the crypto crash

In the gloom of an 18th-century drawing room at the private rehab clinic Castle Craig, near Peebles in the Scottish Borders, Roy, a 29-year-old victim of the global cryptocurrency crash, tells me his story. It is a dazzling summer's day, but here the mood is sombre. Roy shifts uncomfortably in his chair as he begins.

Roy started spending all his time watching YouTube videos and speaking to other cryptocurrency enthusiasts in private groups on the messaging app Telegram. He had been treated for cocaine and alcohol addiction twice, but by 2021 he was sober and working as an addiction counsellor, although he was on sick leave as a result of panic attacks brought on by childhood trauma. He soon relapsed. By day, he checked his cryptocurrency wallets every 10 seconds; by night, he set alarms to go off on the hour. He began fantasising about a life free of financial constraints, in which he would never have to work. "I thought I was on top of the world," Roy says. "Nobody could tell me anything. Money would fix every single problem I faced from now on."

Then the cryptocurrency market crashed. The price of bitcoin fell from £42,000 in May 2021 to £23,000 by the end of June. It rallied to an all-time high of £48,000 in November, before diving to £26,000 at the end of January. Since then, it has been in near-continuous freefall. At the time of writing, bitcoin is hovering at £17,000. "It felt like I had lost my life," says Roy. "Because I had invested everything in crypto. I had built every dream I had on there. So, when it came crashing down, my whole life came crashing down."

Most mornings, he would wake up shaking from alcohol withdrawal, order booze online and spend the day drinking and taking drugs. He developed stomach ulcers. "You can't explain the pain," he says. "I would drink and puke and drink and puke and drink and hope to keep it in, so the pain would go away. I felt like dying."

"It's heartbreaking," Roy says, softly. "I hate myself for the fact that I didn't take it out."

They gather on Telegram to let out howls of grief and short, sharp shrieks of pain. "Eeeeeeee!" yowls a young woman. "Waahahahah," roars a man in a deep baritone. A third person wails like a baby. These are victims of the cryptocurrency bloodbath, 3,315 of whom have assembled in a "Bear Market Screaming Therapy Group" group to vent their anguish. "I had a few people lamenting and crying," says the group's founder, a 30-year-old cryptocurrency investor who gives only his first name, Giulio. "I decided not to ban them. I felt bad. They weren't even able to scream any more. They were just sobbing."

The cryptocurrency industry is in roiling waters. Scarcely a day seems to pass without a wave crashing across the sector. "The rollercoaster has turned and taken crypto holders on a downward spiral," says Susannah Streeter, an analyst at Hargreaves Lansdown. "Many people have been caused serious financial pain."

Last month, major coins including bitcoin and ethereum dropped by more than one-third in just a week. While bitcoin has tumbled significantly on several occasions, this bear run - meaning a period of declining prices - feels different. The industry is larger and more interconnected than ever, with retail and institutional investors jostling for space in what was, until last year, a $3tn market. (The crash has wiped $2tn off the market's value.)

In May, the "stablecoin" terra/luna collapsed, prompting the Guardian's UK technology editor, Alex Hern, to ask whether this was the industry's "Lehman Brothers moment". It had been marketed as a safe bet, due to the fact it was pegged to the US dollar, and promised returns of up to 20%.

The carnage prompted further sell-offs. This month, the cryptocurrency lending platform Celsius Network halted withdrawals for its 1.7 million customers, citing "extreme market conditions". A day later, Coinbase, one of the largest cryptocurrency exchanges, announced that it was sacking 18% of its workforce. At the end of June, the hedge fund Three Arrows Capital, which was heavily leveraged in cryptocurrency and related businesses, went into liquidation.

Everywhere is panic and turmoil - and things look likely to get worse. The casualties range from ordinary retail investors to multimillionaire "whales" and celebrities - in May, the British rapper KSI tweeted that he had lost almost $3m in the terra/luna crash. There have been at least two reported suicides, in the UK and Taiwan; on the Reddit community for terra/luna investors, users share details of suicide hotlines.

Advocates argue that this is but a cryptocurrency winter, as seen in 2013 and 2018. Prices will rebound; spring will turn to summer; the bear becomes the bull. They lampoon so-called "paper-hands" investors, meaning those who abscond at the first sign of trouble, and urge each other to Hodl ("hold on for dear life") and "buy the dip" (purchase coins when prices are low). Others are less certain. Will the frost ever thaw?

There are eight stages of crypto-crash grief.

Shock. "I couldn't eat or sleep for two nights," says Alla Driksne, a 34-year-old chef from London. "I got sick from the stress." She has lost her life savings - a six-figure sum - in the Celsius freeze.

Denial. "I always thought the next project would bring me back up again and I'd cash out before it crashed," says Roy. "In the next cycle, I'm going to try. In the next cycle, I'm going to do it again." A part of him still believes this is possible.

Anger. Alex Koh, a 41-year-old engineer and personal finance YouTuber from Glasgow, directs his towards Do Kwon, the South Korean entrepreneur who founded terra/luna. Koh says he lost enough to buy a four-bedroom house in London. Kwon has been accused of fraud by five investors based in South Korea; he is being investigated there by a financial crimes unit and in the US by the Securities and Exchange Commission.

Bargaining. Vahid, a 31-year-old from London, has used Twitter to plead for his money with Alex Mashinsky, the founder of Celsius. Vahid's life savings, more than £50,000 in cryptocurrency, is locked in his Celsius account. Vahid had planned to use the money to start a business or buy a house. For support, he spends his time on conference calls with other Celsius victims; I listen in to one. "I know anything short of getting your native token [initial investment] back is unacceptable," says one investor, with desperation in his voice. "But would you rather get back 10%, or 20%, or 34%, you know? Now, I'm hoping it's not a complete loss."

Depression. "I thought I'd be able to retire early," says Koh. "But it's all gone down the drain. I've never cried so much in my life."

Acceptance and hope. "I worked my ass off doing 16-hour days for six years to earn this money," says Driksne. "This is hard-earned money. That's what hurts the most. I lost six years of hard work. But I am trying to stay positive. I'll make it back again."

Shame. Vahid hasn't told anyone he has lost his life savings. "I don't want people turning around to me, saying: you should have taken your money out last year," he says. I ask him if he is embarrassed. "Of course," he responds.

Processing. "I hope that I can show that I am willing to learn and accept my mistakes," says Koh. "If I rebound from this, perhaps I can be an inspiration to people elsewhere around the world - or my kids, at least."

The industry's enthusiasts and sceptics agree on one thing: they saw this coming. Perhaps they didn't predict the precise contours of the crash, or the fact that so many seemingly reputable companies would flame out, but there was a sense that the cryptocurrency bull would run out of road. The sector was too hot, too loaded with bad-faith actors, scammers, credulous investors and amateurs feigning expertise in Telegram groups, YouTube videos and Twitter threads. When internet jokes such as PooCoin and Dogecoin surged in popularity, it ought to have been apparent that a market correction was coming. Such stupidity cannot be sustained for long.

"There is a fear factor rippling through financial markets about how out of control inflation is and whether central banks will be able to bring it under control," says Hargreaves Lansdown's Streeter. "When people feel richer, they are more likely to spend on riskier assets, like crypto. But in times of uncertainty, investors flee to safer havens."

The mania around bitcoin and other cryptocurrencies was fuelled by a social media hype machine unprecedented in the history of financial markets. Investors touted new coins that were amassing huge returns, hung off the tweets of crypto-influencers and spoke in impenetrable jargon. "Demand for bitcoin related purely to the level of interest in this new technology, and that interest was manipulated by the companies that offered different cryptocurrencies and exchanges and startups," Yarovaya says. "All of this happened on social media, meaning that investors didn't even know whether there was genuine interest in crypto, or lots of Twitter bots encouraging people to buy. The system wasn't transparent."

At one point, says Koh, he convinced himself that terra/luna was such a great project that he "was ready to sell my house, my car, put everything in". Now, he wouldn't invest even £10 in cryptocurrencies. "It's like a drug," Koh says. "You've been there. You got high. And then you're in rehab. I'm not going to go back in again."

His greatest regret is that he encouraged others to invest in the terra/luna project. His YouTube channel, which has 17,600 subscribers, repeatedly championed the cryptocurrency. "I do feel responsible," Koh says. "I don't know what to do. How much I apologise. I haven't got much hate, because I think I've been quite transparent in how much I've lost. I am not saying people forgive, though. I don't forgive myself for it."

Has the great cryptocurrency revolution simply evaporated?

Nassim Nicholas Taleb was once open-minded about the potential of cryptocurrencies. The risk engineering professor originated the theory of the "black swan": a hard-to-predict but seismic event, such as the 2008 financial crash, that is often rationalised after the fact with the benefit of hindsight. In 2018, Taleb wrote an essay describing bitcoin as "an excellent idea" and a possible "insurance policy against an Orwellian future".

But few in the cryptocurrency world are heeding the esteemed professor's advice. Driksne plans to invest in cryptocurrency in the future, despite her six-figure loss, although she would steer clear of platforms such as Celsius. "I firmly believe crypto is the future," agrees Vahid. "It's not a Ponzi scheme or a scam."

He compares cryptocurrency to the early days of Amazon and Google. When I point out that they were growing businesses, unlike bitcoin, Vahid says: "But bitcoin replaces gold. Bitcoin is digital gold." Taleb is exasperated by this line of reasoning. "If you buy gold and store it in your basement or wear it on your neck, there is no chance of that gold turning to lead over any foreseeable horizon," says Taleb. "Metals don't need maintenance. Bitcoin requires continuous maintenance."

It may be that future economists view the cryptocurrency boom of the early 2020s as a mass Dunning-Kruger event, fuelled by social media and facilitated by technology; an era in which amateurs took financial advice from fellow amateurs and bet the house on speculative investments. "Admitting that you know nothing just tells you that you're lucky," says Roy. "And my ego couldn't handle that. I didn't want to be lucky. I wanted to be someone who knew what they were doing. I'm smart, right? Tell me I'm smart, please? That's how it goes. The whole community reinforced themselves, and each other."

When Taleb published his 2021 paper, he received so much abuse that he had to lock his Twitter account. "I could not believe how psychopathic bitcoin people were," says Taleb. Watching his tormentors have their portfolios wiped out has provoked a degree of schadenfreude, he admits. But he has compassion for the inexperienced investors who got swept up in the hype. "Lots of these kids lost everything they have," he says. "You feel empathy for them." The scammers, who urged others to invest in doomed projects while they were secretly cashing out? "They must be punished," Taleb says.

Future generations may look back at this boom as a period of mania, when money multiplied like bacteria and a collective delusion gripped financial markets. It may seem unfathomable, but it shouldn't. After all, who doesn't want to be rich?

Some names have been changed

In the UK and Ireland, Samaritans can be contacted on 116 123 or by emailing jo@samaritans.org or jo@samaritans.ie. In the US, the National Suicide Prevention Lifeline is 1-800-273-8255. In Australia, the crisis support service Lifeline is 13 11 14. Other international helplines can be found at befrienders.org