Please Be Careful When Investing In Cryptocurrencies, Young Adults!

Please Be Careful When Investing In Cryptocurrencies, Young Adults!

According to a study conducted by KIS Finance, over two-thirds of cryptocurrency investors borrowed money rather than utilizing their own money or savings to make their purchases.

More than two-thirds of individuals who have invested in cryptos (64%) have done so using one or more credit facilities. While this may have appeared to be a great investment idea at the time, the major cryptocurrencies’ values have dropped by as much as 100% in the last month. Many people will suffer significant losses as a result of this drastic drop, while still having to pay back their original debt.

Cryptocurrencies are a dangerous investing strategy since they are very volatile. In November of last year, cryptocurrency values skyrocketed, with Bitcoin reaching its all-time high. Cryptos, on the other hand, have been on the fall since then.

Many people have built their fortunes in the cryptocurrency market, including Vitalik Buterin, the developer of Ethereum, and Brian Armstrong, the founder of Coinbase, who have both become billionaires as a result of the industry’s exponential expansion in recent years.

However, there is cause for concern. Many individuals, particularly teens and young adults, are enticed by cryptocurrency success tales to join the bandwagon and create their own fortunes. However, these success tales may overlook the fact that cryptocurrencies are a high-risk investment.

You’d be laughing today if you bought Bitcoin in February 2011 or Ethereum in 2016 when they were both valued $1. However, if you sold today after investing in Bitcoin or Ethereum in the previous month, you would have lost almost half of your money.

Some investors may choose to wait on, but many others may become panicked as their investment value plummets and sell to reduce their losses, thinking they may lose everything. Those who borrowed to make their first purchase run the danger of not only losing their money, but also having trouble repaying the credit they utilized to make the buy in the first place.

According to the statistics, persons aged 18 to 24 were the most likely to borrow money to make an investment, with a considerable decline in borrowers in the two highest age groups.

This high-profit market appears to have a particularly significant attraction among people under the age of 25. However, because these markets are unregulated, investors have little safety. There is also fear that this generation would be more vulnerable to Crypto influencers’ get-rich-quick schemes, which may tempt young investors to borrow money in the hopes of making significant profits.

Over a third (35.5%) used a credit card to make their purchase. Almost a fifth (19.3%) used their overdraft to pay for the purchase.

 “In recent years, the cryptocurrency industry has grown rapidly and cryptos are becoming a more mainstream product every single day. Even tech giant PayPal has now introduced a cryptocurrency trading platform, making it accessible to everyone.

Although cryptos, and specifically Bitcoin, have seen people make thousands or even millions in profit; the last few months have shown that they are incredibly volatile and can see investors losing large percentages, or all, of what they put in very quickly.

It’s concerning to see that so many people have turned to borrowed funds to purchase cryptocurrencies as they are extremely unpredictable and offer no guarantees that the money invested will be returned. So, if people are investing money that isn’t theirs and subsequently losing it, this could cause some serious financial challenges later down the line.

The biggest concern is those who don’t have the means to pay the money back, especially if their original plan was to repay their loans with the profits made from their investment. With a very strong possibility of losing the money for good, people may be left severely out of pocket and racking up interest on their credit cards and overdrafts. Also, 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.

Borrowing money to invest in cryptos can become a very vicious cycle that’s difficult to break. Once you start losing money, it can be very tempting to invest more to make the money back; especially if you don’t have other means of repaying the funds.

Great care should be taken when you invest money anywhere, but especially when it’s something as volatile as cryptocurrencies. If you can, seek some professional financial advice first and never invest more than you can afford. Buying cryptocurrencies should also not be your only form of investment or savings as there is very little stability – spread your investments out and treat cryptocurrencies as a smaller, fun investment,” Holly Andrews, Managing Director at KIS Finance said.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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