According to Joseph Borg, an America Financial Regulator, people are taking mortgages to buy Bitcoin. Different individuals have taken their savings for retirement and various loans to buy Bitcoin and speculate with its price.
Risky Investments in the Cryptocurrency World
Since the beginning of the year Bitcoin has multiplied its price more than ten times. In January, Bitcoin was traded under $1,000 dollars and now it has reached new all time highs: $17,533. Other cryptocurrencies have also increased their price significantly and even more than Bitcoin in 2017. Litecoin for example has increased more than 4,000 percent in one year!
Investors that are in the cryptocurrency world since some years registered important returns. Some of them became millionaire, bought a property or paid debts. Lots of other investors started to take part in this market since some months and they are expecting to receive an important return. Clearly, they need more money (the price is much higher than before) and they will have to wait longer to see similar increases in Bitcoin’s price.
We don’t know where regulations will take Bitcoin or the cryptocurrency market. When China decided to ban ICOs and cryptocurrency exchanges, Bitcoin price dropped almost 50 percent. When in 2014 MT Gox got bankruptcy, Litecoin and Bitcoin lost almost 90 percent of its value.
Loans and Retirement Savings
It is a risky investment, and several families could suffer from the Bitcoin price craziness. It is always important to invest responsibly and using money that the investor is able to lose. Deutsche Bank has published a list of 30 risks to the markets in 2018 and a Bitcoin crash is included. According to this bank, this is the 13th most important risk for the worldwide markets. In fact, a crash in the cryptocurrency world is more dangerous for the markets than North Korea.
Many experts believe that the markets are increasing so fast because of leverage trading. For example, Bitfinex allows users to operate with more than three times the funds you have.
Many Millennials are starting to place their retirement savings in Bitcoin and other virtual currencies. The volatility and a possible future crash make of it a very risky investment.
“All of my net worth is in cryptocurrencies, because I see them as the best way to escalate my ability to be financially secure and pay off my student loans. I like the idea of decentralization, the fact that there is a lot less corruption and political ties. That idea appeals to me… Not having to go through banks. Having financial control over our lives again,” commented to Forbes, Roshaan Khan, a 20 year old senior at Virginia Commonwealth University.
In Reddit, many users are saying that they are paying fees in order to take their savings out from their retirement accounts.
Joseph Borg, in an interview with CNBC has commented on the matter:
“We’ve seen mortgages being taken out to buy Bitcoin… People do credit cards, equity lines. This is not something that a guy who’s making $100,000 a year, who’s got a mortgage and two kids in college ought to be invested in.”
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