A large number of retail investors in the United States took out loans, often at exorbitant interest rates, to buy cryptocurrencies, and more than half of those investors ended up losing money, according to a recent investigation by DebtHammer.
DebtHammer surveyed over 1,500 people in the United States to learn about their crypto investing habits and how they affect the already indebted nation.
Loans for Crypto Investments
According to the survey, over 21% of crypto investors said they used a loan to pay for their crypto investments.
Personal loans seem to be the most popular choice among investors, as more than 15% said they used one to fund their crypto purchases. Many have also used payday loans, title loans, mortgage refinances, home equity loans, and even leftover student loan funds to acquire crypto.
About 1 in 10 investors who have used a payday loan have used it to purchase cryptocurrencies. Most borrowed between $500 and $1,000 to invest in crypto, the survey showed. However, DebtHammer researchers noted that these were risky purchases despite the low amount borrowed, as payday loans averaged around 400% APR.
Retail investors who have used loans to purchase crypto have said their purchases have not always been successful. Nearly 19% of respondents said they had trouble paying at least one bill due to their crypto investments, while around 15% said they were worried about eviction, foreclosure or destruction. a car repossession. Payday loan users appeared to have suffered slightly less, with only 12% saying they had trouble paying a bill or worried about evictions, foreclosures or foreclosures.
Loans aren’t the only way investors used to buy cryptocurrencies when they ran out of money.
According to the survey, over 35% of respondents said they used a credit card to buy crypto. While around 20% of them paid it off when the bill was due, 14% said they were paying it back gradually with an introductory offer at 0% APR or full interest.
All the borrowed money went to a handful of cryptocurrencies. The survey showed that more than half (54%) of respondents used borrowed money to buy Bitcoin (BTC). Dogecoin (DOGE) came in second, with nearly 35% of respondents saying they bought the token with loans, while just under 30% said they bought Ethereum (ETH).
Just under 23% of those who borrowed money to buy cryptocurrency said they did so because crypto prices had fallen sharply. Around 15% said they consider cryptocurrencies a good long-term investment, while 17% said crypto prices are “historically low”.
A notable percentage of respondents (18.5%) said they borrowed money to buy cryptocurrency because their credit card company or bank offered them a promotional interest rate of 0%.
However, not everyone who plays wins.
Of those who borrowed money to invest in cryptocurrencies, around 60% lost money. And while more than a third of them lost $1,000 or less, 6% said they lost between $50,000 and $100,000 and 5.5% said they lost more than $100,000.
Investing in cryptocurrencies with borrowed money also does not result in significant gains. The majority, 27%, earned up to $1,000, while only 7.5% earned between $1,000 and $5,000.