Over 65% of crypto investors used borrowed funds – Report

  • Some of the crypto investors who used borrowed funds for their crypto purchases are nearly regretting it right now.
  • A new study breaks down investors’ age and how they funded their investments.

A new study by a UK-based loan finance firm, KIS Finance, shows that more than 65 percent of investors in digital assets used borrowed funds to finance their investments. They got into debt to invest in digital assets instead of using part of their income or savings.

According to the study, 64 percent of these investors had to use loans from more than one loan company to get the total amount of money they needed for their investment. The idea of borrowing and investing in cryptos as of last year may have seemed logical.

However, none of these investors expected this massive drop in crypto prices, especially in the last 30 days. The value of some cryptos has dropped by up to 100 percent. Hence, many of these investors are already incurring huge losses.

Yet, they will still need to repay their loans and the interest accumulated from these loans. Like all humans, the reactions of these investors will vary. Some might find other means to keep repaying their loans and not sell their digital assets, hoping for a rebound. However, others might decide to sell right away and cut their losses.

A breakdown of these borrowers based on age

According to the study, the percentage of young persons who borrowed funds to buy cryptos was the highest. Here’s a breakdown of these investors based on age:

  • 18-24 70 percent
  • 25-34 64 percent
  • 34-44 68.9 percent
  • 45-54 62.5 percent
  • 55-64 45 percent
  • 65+ 25 percent

A breakdown of the top loan facilities for these crypto purchases

A large percentage of these borrowers used credit cards and overdrafts to fund their digital asset purchases. However, some of them also explored other credit facility options. Here’s the full breakdown:

  • Credit card – 35.5 percent
  • Overdraft – 19.3 percent
  • Personal loan – 14.6 percent
  • Secured loan – 9 percent
  • Payday loan – 7.6 percent
  • Re-mortgage – 3.3 percent

KIS finance CEO, Holly Andrews, offered a few suggestions regarding crypto investments through credit facilities. According to her, “some credit facility companies will consider transactions of this nature as a cash advance. Hence, the interest rate on such cash advance fee will be very high.”

She added that “I’d advise anyone willing to invest in cryptos to do so with money they won’t mind losing. Instead of funding it with a credit facility, their income or savings would be a better option.” Despite the huge volatility in the current crypto market, some analysts predict that the leading digital assets will soon become bullish.

However, a few others argue that the current global recession is the cause of this volatility. Hence, there would only be normalcy when the global recession is over. Is it wise to borrow money and buy digital assets? The answer is no, based on current circumstances. However, the next few months will determine that will change.