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People Are Taking Out Crazy Amounts of Debt to Buy Bitcoin


People Are Taking Out Crazy Amounts of Debt to Buy Bitcoin

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How much would you risk to get your hands on some bitcoin?

It’s hard to keep up with the fast-fluctuating price of this cryptocurrency. One bitcoin may have been worth $500 a few short years ago, but its price hovers around $16,000 today.

How’s a normal person supposed to invest in this hot new currency when it takes thousands in real cash to buy just one piece of this digital cash?

Borrow it.

Yes, People Are Taking Out Mortgages to Buy Bitcoin

In an interview with CNBC, Joseph Borg, president of the North American Securities Administrators Association, said people are going into debt to buy into the bitcoin craze.

“We’ve seen mortgages taken out to buy bitcoin,” Borg said. “People do credit cards, equity lines.”

It could be a solid investment, as long as the price of bitcoin stays high and you can sell off enough of it later to pay back your debt.

Others are taking risk of a different kind: Investing their retirement savings in bitcoin. Companies like BitcoinIRA are popping up to facilitate transferring your retirement funds into an account set up specifically to invest in bitcoin instead of stocks and bonds.

Have These People Lost Their Marbles, or Are They Just Early Adopters?

Borg explained to CNBC that cryptocurrency is so new that it hasn’t yet been regulated.

“You haven’t seen the market actually adjust to this new phenomenon,” Borg said. It doesn’t mean there’s no real value, he said, but it’s probably inflated right now.

Remember Beanie Babies? Yeah, it’s like that.

Everyone lost their minds over these wee stuffed toys, spending way over ticket price to get the ones that were deemed most valuable. Within a few years, that value — and all the cash people had spent buying Beanies — tanked. Over time, supply simply overtook the demand.

But bitcoin has an important limit in place: Its supply is capped at 21 million. Over time, the need for miners to generate bitcoin will slow, but the same amount of bitcoin will stay in circulation.

If bitcoin holds its value, risky investments to get a piece of the pie may pay off. But it’s too early to tell.

Lisa Rowan is a senior writer and producer at Codetic.

This article contains general information and explains options you may have, but it is not intended to be investment advice or a personal recommendation. We can’t personalize articles for our readers, so your situation may vary from the one discussed here. Please seek a licensed professional for tax advice, legal advice, financial planning advice or investment advice.

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