Bitcoin Forum

I’ve come across these news: https://steemit.com/bitcoin/@worlinfo/the-uk-is-experiencing-a-wave-of-mortgage-debt-to-invest-in-the-bitcoin

According to the article, people who do such a thing are wealthy people, entrepreneur-like. However, is this get spread, I won’t be surprised if middle class people start doing it, as it happened with the financial bubble: middle class people were getting mortgage after mortgage because everyone knew someone who had made a good profit by selling houses in the short term. Many of them got caught when the bubble exploded.

Something similar may happen. Even if bitcoin goes up in the long term, we can have a period like 2010-13 in the future, where at the end of 2009 btc reached an ATH, then went down and it took three years to recover. So people getting into debt and expecting to make short-term profits might face deep trouble.

steemit is not a valid source! people post there to get paid so they try their best to post something that gets more attention even if it means providing false or exaggerated facts.

besides people who invest in bitcoin aren't really publicly releasing statements about where they got the money from so that we have any statistics whether they are really getting mortgages or not.

To be fair, if you believe BTC will increase by 7% or more per year, you could make money buy getting a mortgage and buying BTC. People get loans to buy cars/boats/holidays which depreciate very quickly. It's not as dumb as it sounds, but is very risky.

This move will get you in trouble in no time. Just spend what you can lose, and never ever touch your lifeline(savings) for you will never know when emergencies come. Being in bitcoin means you need to be wise and watch for those traps, we can't be carried away with our emotions and control it as long as we can. Live simple for now and you'll see you won't not that much money to live by, let your coins grow may it be BITCOIN or ALTCOINS (MINE IN DEEPONION) and sooner you will see that your future is getting brighter.

That was such a poorly written article with a jumble of pseudo finance, would not take it seriously at all.

But in terms of the idea that was brought up by OP, it is something worth discussing. I do see crypto as a viable asset class for diversification, together with art, real estate, stocks, wine etcetc. Diversifation is part of any sound investment strategy and therefore we might be seeing more of such ideas coming into play.

Bitcoin prices continue to increase making most speculators worried about events like 2010-2013. That's why I prefer trading in the short term - we will never know what will happen to bitcoin in the future. With short-term trading we can reduce risk, even so we don't "kill" the possibility for long-term investment.

If this is true,then people are making wrong financial decisions.
They should use their savings to invest in cryptocurrencies,not mortgage debts.
This financial strategy is too risky and they might lose lots of money.
What if the UK central bank acts like China central bank and bans all the cryptocurrencies?

That article cites the FT as a source without giving a link for reference, I'd like to see the original piece as it's probably based on anecdote rather than evidence. With ever-increasing property prices in the UK, it's not really at all uncommon for wealthy people to remortgage to release equity. That some of it will find its way into crypto is not in the least surprising either.

So far people who have done it made money (unless they did it when bitcoin was 5K$).
Generally speaking i would not put my house into bitcoin since it is too risky, I will however scam the banks on giving me loans and invest in bitcoin. in worst case scenario you can always run away from the country (after giving away the house to a family member).

This is certainly not the ideal choice for taking debt for btc. BTC is very volatile as we all know it. Yes it could certainly give fantastic returns no doubt about it, but just in case if something bad news comes and market falls and takes couple of years to recover then you are in catch 22 situation. Either you sell in loss and pay the debt or else you will hold in anticipation of further rise.

Thanks for your replies. I didn’t know that steemit was a non-reliable source. Thanks for that. I’ve googled the info and there is another site saying the same as the steeemit article but in this case linking to the article of the FT:

https://www.ft.com/content/d175fc82-76a7-11e7-90c0-90a9d1bc9691

After reading the article, I can say that stating that people are getting into mortgage debt to invest in cryptos is really biased. The only think that could point to cryptos is the following:

“Wealthy homeowners are borrowing against their property to invest in bonds, equities, alternative investments or commercial property as the low cost of debt creates opportunities for “mortgage arbitrage”.

So, “alternative investments” could point to cryptos but it could also point somewhere else.

It is a bad way of investing anyway, no matter if you do it to invest in cryptos or the stock market.

This is not a good development actually but I doubt such a kind of source as Steemit is not a news site and just an opinion and ideas site where people can claim anything they have in mind. Now, granted that this can be true, then maybe there is a need for people to get educated of what they are getting into because even if we are maintaining a bullish stance on Bitcoin there are always inherent risks in nay kind of investment vehicle and Bitcoin is never an exemption on this rule.

We have already enough speculations in Bitcoin and adding more weight on the boat may not be the best idea as of now. However, it is quite difficult to determine if one who is buying Bitcoin can be speculator or or a long-term holder. And since we are aiming for mainstream acceptance, we do welcome speculators anytime anyhow. We can see how resilient Bitcoin in this case.

I have friends who bought bitcoins with their credit cards and they doubled their purchase price and paid back the credit card debt. They had no disposable cash to buy bitcoins and they took the risk. I will never do this, because there are too many risk scenarios for this to fail.

Most of them took the profits to buy useless consumer junk, so they wasted another opportunity to buy more bitcoins without any risk. ^sad^

Not really. Secured mortgage lending is about the cheapest way of borrowing there is. For someone who is sitting on a large amount of equity in property and has an income that can easily sustain the mortgage payments, it makes more sense to leverage their investments this way than any other method. I wouldn't describe leveraged investing as a bad idea but it is for the more risk tolerant, ie those that can afford to lose it.

To use mortgage debts to buy bitcoins is a very risky business. Here, the growth rate of bitcoin should cover the payment of interest on the mortgage. And if bitcoin for a while will not grow or even fall in price? But the money will need to be paid regularly at certain times. It's very risky, especially now, due to bad news from China.

I agree, you should always check your sources carefully and if possible consult multiple sources to verify your story.

Taking a mortgage out is extremely risky but is their decision. I personally wouldn't do that.

you can never say if it is good or bad. maybe some people prefer this way of trading. some people are naturally high-risk-takers. they enjoy the risk itself! sometimes it works and that huge risk gives them a huge reward, sometimes it doesn't work and their whole life is ruined.

the question is how someone who is doing such a thing is handling the risks and what are his/her plans for each scenario in case something went wrong. for example can they pay back the mortgage if they lose it all in trading? if yes, then i don't really see any issue with something like that if they can accept the risks.

I wouldn't call these people entrepreneurs anymore. Taking a mortgage simply to invest in a highly speculative thing like bitcoin? That comes much closer to gambling to me.

If the trend continues they will reap the rewards ofcourse, but who knows when the next bear market will start? That can be a long painful ride for them when it happens.

The fact that they need to mortgage also shows me that they don't have the financial means to invest in "cash", which makes it even worse.

I do heard of a case in reddit years ago when someone go and loan about $10,000 from bank just to buy btc. It was around $20 that time and it moon to $1000. He became a millionaire and everyone was congrat him. Although it is not a wise choice to always dump all your investment in one egg, great rewards come with great risk. I have not followed up from him after that as it was china who ban btc and the price drop back to $200. However, even so, he is still in profit.

Exactly the point. If they have a secure job and can comfortably make the repayments every month then there is very little risk at all. Why leave all that equity tied up in your house when you could potentially make a good return on it.

Its a wrong way to earn money.Its seems risky way to earn.What if Uk banned bitcoin same as china ?.They can lose a lot of money 

It has the opportunity to make some serious money, but it's a very, very risky strategy that personally I could not take on.

It's still their risk to mortgage. They looked at bitcoin in a positive way. Borrowing in banks will not be a problem if they can pay it from their monthly salaries because they have jobs.

The original article: Wealthy borrowers use home loans to bet on stock market (https://www.ft.com/content/d175fc82-76a7-11e7-90c0-90a9d1bc9691):
This doesn't sound like it's common practice, just an extreme example of what one person did. In the Netherlands, people have been using mortgages to invest in the stock market for decades. Bitcoin goes up faster than stock, so it's the next logical step. Given a large enough number of people, it becomes very likely that some of them do a certain thing.
This is just one of the risk of very cheap debt. How nice would it be to turn that £2m into another £10m? If you would have done this just a year ago, you'd be looking at even more than £10m now.
As long as it's the wealthy people who do this, and they can afford to lose their investment, I see no down side. It's good for Bitcoin's growth too.

The risk is indeed if people start investing money they can't afford to lose. I sometimes feel like: "I wish I would have invested anything I have in Bitcoin at some point in past", which is a very risky thought if you extrapolate past price increases into the future. I can't afford to lose my savings in a stock (or Bitcoin) crash, which is the reason I'm slowly losing it to inflation on a savings account.

But if they are so solid financially why add this risk, sell the house and with the cash that you have invest it all in bitcoin and pay rent for a few years while that is a risky move you are not going to be in debt to any bank, even if the interest rates on mortgages are very low you are still paying interest rates and if something happens to the economy those interest rates could change, or you could lose your job.

Hmm. I guess people figure the money they make investing it in BTC they could use it to help pay off the house in whole so they don't mind taking a little monthly hit for now.

I don't know if this source is valid either, but none of this would surprise me.  People
do insane things like this when *bubbles* start forming.  There's no way anyone should
be buying as speculative an asset such as bitcoin with mortgage money.  This is worse
than the housing meltdown years ago.  But people are funny like that.