American consumers are using everything from equity loans to credit cards to invest in the cryptocurrency, according to a regulator.
According to the securities regulatory, Joseph Borg, American consumers are becoming obsessed with Bitcoin, and even resorting to taking out mortgages to get a foot in the door. Potential investors seem to be okay with increasing risky ways of getting into the pricy investment industry, including using credit and equity loans.
By now, every single individual with internet access has probably heard of some urban legend of investors risking it all to buy Bitcoin and then winning big. This includes the “Reddit guy” who took out an equity loan on his home to invest in Bitcoin. At the time of investment, Bitcoin was trading at $3,000, meaning his risk paid off. Borg confirms that cases similar to the “Reddit guy” are becoming common amongst American consumers, and while the Bitcoin price climbs higher, so does the risk that potential investors are willing to face.
In an interview with CNBC earlier this week Borg stated that American consumers are doing anything and everything to participate in the market such as taking out mortgages, equity loans, and using credit cards. According to Borg, more often than not, these consumers are decidedly middle-class who could face crippling debt if their investment should go south.
Borg is currently North American Securities Administrators Association president, and also serves as director of the Alabama Securities Commission. According to the securities veteran, families have started risking it all to get into Bitcoin, something which not even the most ardent crypto enthusiasts would necessarily advise.
Several exchanges and trading platforms have also recently started accepting credit cards. Major platforms such as Coinbase, have been plunging consumers into major credit card debt ever since their decision to start accepting the payment method. So far, consumers have been able to manage their credit card debt with their profits. However, in such a volatile industry, several users would be left with crippling credit card debt if the Bitcoin industry goes through a price decline.
According to Borg, the current mania has to reach a point of leveling off eventually. This past year, however, has been a stellar one for the cryptocurrency. Bitcoin and other altcoins have continued to set new records, even when its biggest market, China, decided to ban cryptocurrency. However, this does not mean that Bitcoin is untouchable. Once a major market such as South Korea, or the US install damaging policy changes, the Bitcoin price could be negatively impacted.
Ever since its early days, Bitcoin has become much more stable, however, the cryptocurrency market still experiences bouts of volatility. While things have been going well so far, any asset, digital or tangible, has the possibility to go through a damaging price correction at any time.
Ever since Bitcoin’s infancy, its most ardent advocates maintained that the new decentralized, peer-to-peer cryptocurrency would be the death of traditional state-sponsored banks. However, at the moment banks stand to lose, not because of the popularity of cryptocurrency, but because of the increasing credit being taken out to participate.
