Investors who borrowed money to buy cryptocurrencies are feeling the heat now. Here’s the breakdown of how they raised the funds to buy their crypto.
A recent study found that more than two-thirds of cryptocurrency investors surveyed had borrowed money to make crypto purchases. Rather than using their earnings or savings, they went into debt for the cryptocurrencies of their choice.
64% of those who bought cryptos used one or more credit facilities to get the sum they needed.
At the time, that might seem like a good strategy. But over the past month, mainstream crypto prices have dropped 100%. This fall will leave many investors facing significant losses. And they will still have the cost of repaying their original loan.
Some investors are expected to sit tight, others may panic and sell to cut their losses.
Investors by age group
Borrowing money to buy crypto seems to be a young game only, with people between the ages of 18 and 24 being the most likely to have borrowed money to buy their favorite cryptocurrencies.
18 – 24: 70%
25 – 34: 64%
35-44: 68.9%
45 – 54: 62.5%
55 – 64: 45%
65+: 25%
How they borrowed
Different credit facilities have been used to fund cryptocurrency investments, with credit cards and overdrafts leading the way.
Credit card – 35.5%
Overdraft – 19.3%
Personal loan – 14.6%
Secured loan – 9%
Payday loan – 7.6%
Re-mortgage – 3.3%
Holly Andrews is the Managing Director of KIS Finance. “…Some credit card providers will treat this type of transaction as a cash advance, which means cash advance fees and a higher interest rate will apply. So if you are considering investing in cryptocurrencies you should only invest an amount of money that you can afford to lose and it should be funded by income and/or savings rather than a credit facility.
While the crypto market is volatile, many commentators are predicting the price of the mainstream cryptos to return to record highs, while others say it is a sign of global recession. Borrowing money to buy cryptocurrencies could be a good decision in the long run. Only time will tell.
