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 has discovered that over two-thirds of cryptocurrency investors surveyed had borrowed money to make crypto purchases. Rather than using income or savings, they got into debt for their cryptocurrencies of choice.
64% of those who bought cryptos used one or more credit facilities to get the sum they needed.
At the time, this may have seemed like a sound strategy. But in the last month, prices of mainstream cryptos have dropped by as much as 100%. This fall will leave many investors facing large 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 breakdown
Borrowing money to buy crypto seems to be a young person’s game, with those aged 18 to 24 most likely to have borrowed money to buy their fave cryptocurrencies.
18 – 24: 70%
25 – 34: 64%
35 – 44: 68.9%
45 – 54: 62.5%
55 – 64: 45%
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 at KIS Finance. “…Some credit card providers will view this type of transaction as a cash advance, meaning a cash advance fee and higher interest rate will be applied. So, if you are thinking of making an investment into cryptocurrencies, you should only invest an amount of money that you can afford to lose and it should be funded through 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. Borrowing money to buy cryptocurrencies could be a good decision in the long run. Only time will tell.
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