A famous cryptocurrency influencer took to Twitter to share the possibility of rendering banks useless. According to Cobie, cryptocurrency users should take loans and buy Bitcoin. The users should then default on the loans and cause a lending crisis. The crisis will then cause bank crashes.
“Big love to anyone that took my 100% legitimate financial advice in September 2014 and defaulted on their loans to buy Bitcoin.”
Is this True: Loans for Cryptocurrency?
A survey conducted in July 2022 shows that a percentage of US investors took loans to buy cryptocurrencies. The survey, conducted by DebtHammer, shows retail investors borrowing money and defaulting loans to purchase cryptocurrency. The firm surveyed more than 1500 US citizens to monitor their cryptocurrency investing habits. Many admitted to using loans to pay for cryptocurrency investments.
About 15% of the investors took to personal loans because they are easy to apply and pay off. Others used mortgage refinances, title loans, home equity loans, leftover student loans, and title loans—1 in 10 investors who used payday loans borrowed between $500 and $1000. Despite the small amount, the loans were risky because of the high APR, about 400%.
According to DebtHammer, many investors defaulted on paying specific bills by investing in cryptocurrency. 15% reported fear of car repossession, eviction, and even foreclosure. The least affected users were payday loan users, who only struggled to pay specific bills.
Credit Card Bills
The survey further shows that cryptocurrency investors used loans and credit card bills. More than 35% admitted to using credit cards for cryptocurrency purchases. About 20% paid off the debt, whereas 14% still paid. The advantage of using credit cards was 0% APR.
More than half of these investors borrowed money to buy Bitcoin, Dogecoin, and Ethereum. Many purchased during the bear market with hopes of a bull run. However, this year’s cryptocurrency markets have been challenging. Of the 100%, about 60% lost money. Only 15% agreed that cryptocurrency is a good investment. According to most investors, using loans to buy cryptocurrency is not wise. Invest only what you can afford to lose.
Closing Thoughts
Cryptocurrency influencers share contradictory information on social media sites. It is best to follow your trading strategy as an investor. Even though Cobie is a renowned and generous cryptocurrency influencer, it is wise to do thorough research.
In response to Cobie’s tweet, one user by the name of grahvity gave the idea a name, “The Cobain Effect.” The user replied,
“The “Cobain fect” is real! @CryptoCobain
Other users disagreed with Cobie.
The cryptocurrency market is highly volatile. From the survey above, most users admitted to incurring losses. Cryptocurrency cannot make you rich in a day. This is a lie that social media sells. Nothing comes easy. Binance CZ and Vitalik Buterin constantly advise users on their Twitter pages to take it a day at a time. Do market research, create a trading strategy, avoid loans you cannot repay, and run away from FOMO. In simple terms, invest only what you can afford to lose.
