As cryptocurrency prices skyrocket, over 60% of investors borrow money to fund their investments – London Business News
In a recent study by KIS Finance, it was revealed that over two-thirds of cryptocurrency investors borrowed money to complete their purchase, rather than using income and / or savings.
Overall, more than two-thirds (64%) of those who invested in cryptos used one or more credit facilities to do so.
Percentage of crypto investors who used one or more credit facilities to finance the purchase, by age:
45 – 54: 62.5%
As the data shows, people aged 18 to 24 were the age group most likely to use borrowed funds to make their investment, with a significant drop in borrowers in the two oldest age groups. .
What type of credit facilities have people used to fund cryptocurrency investments?
When we break down the types of credit facilities that people have used to purchase cryptocurrency, over a third (35.5%) made their investment with a credit card. Almost a fifth (19.3%) financed the purchase on its overdraft.
Credit card: 35.5%
Personal loan: 14.6%
Secured loan: 9%
Personal loan: 7.6%
Holly Andrews, Managing Director of KIS Finance, said: “In recent years, cryptocurrencies have become much more common with massive companies like PayPal now introducing cryptocurrency trading.
Although cryptos, and Bitcoin in particular, have seen people make thousands, if not millions, in profits; they are incredibly volatile and can see investors lose huge percentages of what they have invested very quickly.
It is concerning that so many people have turned to borrowed funds to purchase cryptocurrencies, as they are incredibly volatile and offer no guarantee that the money invested will be paid back. So if people spend money they don’t have and lose it, it could lead to serious financial problems down the road.
The biggest concern is whether people will have the capacity to repay the money. With a very high possibility of losing money for good, people can find themselves seriously without a pocket and accumulating interest on their credit cards and overdrafts. Additionally, some credit card providers will consider this type of transaction to be a cash advance, meaning that a cash advance fee and higher interest rate will apply.
So if you are planning to invest 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.
Borrowing money to invest in cryptos can become a vicious cycle that is difficult to break. Once you start to lose money it can be very tempting to invest more to get the money back; especially if you have no other way to repay.
Great care should be taken when investing money anywhere, but especially when it comes to something as volatile as cryptocurrencies. If you can, seek professional financial advice first and never invest more than you can afford. Buying cryptocurrencies also shouldn’t be your only form of investing or saving as there is very little stability – spread your investments and treat cryptocurrencies as a smaller, fun investment.