[2017-12-12] Americans Are Taking Out Mortgages to Buy Bitcoin

[ivanpoldark]

People are taking out mortgages to buy bitcoin, says securities regulator Joseph Borg. Coupled with accounts of credit cards and equity loans being used to obtain bitcoin, it raises the possibility of risk-taking investors being left deeply indebted or potentially even homeless.

Betting It All On Bitcoin

Most people have heard of “that Reddit guy” who took out equity on his house to buy bitcoin earlier this year. His daring investment, made when bitcoin was trading at around $3,000 a coin, has paid off so far. But if Joseph Borg is correct, such cases are no longer isolated, and the higher bitcoin climbs, the greater the risk credit-takers face.

Speaking on CNBC on Monday, the veteran securities regulator said:

We’ve seen mortgages being taken out to buy bitcoin…People do credit cards, equity lines. This is not something a guy who’s making $100,000 a year, who’s got a mortgage and two kids in college ought to be invested in.

As president of the North American Securities Administrators Association and director of the Alabama Securities Commission, Borg has a wealth of experience to call upon. Even the most ardent of bitcoin believers would concede that families probably shouldn’t be betting everything they have on bitcoin.

Using Cheap Credit to Buy Expensive Bitcoin

Mortgages and equity aren’t the only means by which people have been scrambling to free up funds for bitcoin: major sites such as Coinbase accept credit card payments. So long as bitcoin keeps rising, buyers can pay off their monthly credit card debt with their profits. A major correction, however, would leave investors indebted and liable to defaulting on their loans.

“You’re on this mania curve. At some point in time there’s got to be a leveling off,” said Borg on CNBC’s Power Lunch. Bitcoin has proven extremely resilient this year, shaking off negative news such as a Chinese cryptocurrency exchange crackdown without much fuss. It is not inconceivable, however, that a major global event, such as legislation emanating from the U.S. or South Korea, could send the price of bitcoin plummeting.

Newcomers to bitcoin have yet to experience a bear market. While bitcoin’s volatility is much gentler than it was in its earliest days, the cryptocurrency is still prone to swings, and like any asset is perfectly capable of heading south. Homeowners who mortgage their property and profit handsomely from bitcoin’s rise will feel rightfully vindicated. Not everyone can be a winner however.

When bitcoin was first born, many of its earliest adopters saw the peer-to-peer currency as a “bank killer”. It would be ironic if the digital currency’s rise – and subsequent fall – was to take a bite out of the banks due to a credit craze fueled by bitcoin.

https://news.bitcoin.com/americans-taking-mortgages-buy-bitcoin/

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[Guardian.P]

Funny turned out to be the moment. Several months before this incident, I thought about taking a loan for investing in Bitcoin. But one thing stops me, that there are too high risks, and then there is instability. In security I closed this question for myself. And I continue to think so, is this normal?

[aso118]

This is worrying. If this becomes a widespread trend, we definitely are in bubble territory. there are stories about people who sold their house, went all-in on Bitcoin and became millionaires. But that doesn't mean others should try to adopt the same strategy. Not everybody can afford to take such a big gamble.

[digodk]

This is worrying. If this becomes a widespread trend, we definitely are in bubble territory. there are stories about people who sold their house, went all-in on Bitcoin and became millionaires. But that doesn't mean others should try to adopt the same strategy. Not everybody can afford to take such a big gamble.

This got me thinking the same thing, this is not a healthy behavior. It's the sort of stuff that gets the government attention and its urge to control.

Funny turned out to be the moment. Several months before this incident, I thought about taking a loan for investing in Bitcoin. But one thing stops me, that there are too high risks, and then there is instability. In security I closed this question for myself. And I continue to think so, is this normal?

I had the same thoughts about a month ago. Same thing stopped me, the risks. I kinda regret it, kinda not. If one thing, Bitcoin proposes to replace the current credit system, so I see some hypocrisy in that.

[iamTom123]

We have to admit it that when we first get involved with Bitcoin we know that there was that feeling that we can just be gambling our money to something we could see and touch. Fast forward today, we then realized that the 'gambling' paid off and we feel blessed to gain the benefits of risking our money, time and effort for Bitcoin. However, because we must be rational at all times, we have to also consider that irrational investment behavior may not be for the best of our interest. As others will love to say when investing into something: Invest what you can only afford to lose otherwise you might lost everything. Bitcoin as an investment is not a risk-free platform though we have to give credit to the many risk-takers who made their good fortune in Bitcoin. There must be some sort of balancing act to do here. 

[J. Cooper]

If you're taking out loans to purchase bitcoin, or any cryptocurrency really, you are a fool. It can be as profitable as you want, you always have to realize that everything can come crashing down. Investing in cryptocurrency with money you can lose is a risk but investing with money from your mortgage is a risk no middle class family can afford to take.

[Xynerise]

This will not end well.
Many people are seeing bitcoin as a get-rich-quick scheme.

Honestly I hope bitcoin crashes so they lose their money.

[richardsNY]

If you're taking out loans to purchase bitcoin, or any cryptocurrency really, you are a fool.

Basically that. I remember having seen a documentary once about how Chinese people are taking out mortgages and high loans to invest (better said, gamble) in stocks, where most of these people end up in life long debt situations, and where some even revert to suicide. I however have to point out that people are all responsible for their own actions, so those who end up walking this path of potential self destruction, will only have themselves to blame. I can't even imagine myself taking out loans or mortgages to invest that money into something I think might become more valuable -- it's called gambling, and that's something I will never do.

[digodk]

This will not end well.
Many people are seeing bitcoin as a get-rich-quick scheme.

Honestly I hope bitcoin crashes so they lose their money.

It probably will.
This is  the sort of euphoria that goes well with a pre crash moment. Or bubble, if you wish.
I'd like to see all these fellas trying to cash out their paper earnings at once and see prices starting to dip.

[kivo2004]

This is really strange. Every time I talk to someone about cryptocurrency, I advise them not to get involved because we're getting close to a major correction imo. However, please always come back telling me they bought BTC, Ether, LTC etc. I really don't get how much longer this mania will last. Now that the institutional money is starting to creep in with the involvement of the futures market, I fear that we're in for a major roller-coaster. I hope that some very powerful people already have major investments in BTC. Otherwise, they may try anything to get it back from us regular folks.

[gentlemand]

I'm going to guess that the Reddit guy is the one he's referring to, he's probably also the one and only person in the entire world who's admitted to doing it too. Still, it makes for a good angle.

I remember watching 2013 play out. There was loan talk then too. People were desperate to get in when it had 'fallen' to $900. I wonder how many sat it out. Sad to witness but completely unsurprising.

With Bitcoin there's enough history to guess what could happen again. If you're too blind to it and refuse to consider it then you're going to get what you deserve if it goes wrong.

[Qartersa]

People are taking out mortgages to buy bitcoin, says securities regulator Joseph Borg. Coupled with accounts of credit cards and equity loans being used to obtain bitcoin, it raises the possibility of risk-taking investors being left deeply indebted or potentially even homeless.

Betting It All On Bitcoin

Most people have heard of “that Reddit guy” who took out equity on his house to buy bitcoin earlier this year. His daring investment, made when bitcoin was trading at around $3,000 a coin, has paid off so far. But if Joseph Borg is correct, such cases are no longer isolated, and the higher bitcoin climbs, the greater the risk credit-takers face.

Speaking on CNBC on Monday, the veteran securities regulator said:

We’ve seen mortgages being taken out to buy bitcoin…People do credit cards, equity lines. This is not something a guy who’s making $100,000 a year, who’s got a mortgage and two kids in college ought to be invested in.

As president of the North American Securities Administrators Association and director of the Alabama Securities Commission, Borg has a wealth of experience to call upon. Even the most ardent of bitcoin believers would concede that families probably shouldn’t be betting everything they have on bitcoin.

Using Cheap Credit to Buy Expensive Bitcoin

Mortgages and equity aren’t the only means by which people have been scrambling to free up funds for bitcoin: major sites such as Coinbase accept credit card payments. So long as bitcoin keeps rising, buyers can pay off their monthly credit card debt with their profits. A major correction, however, would leave investors indebted and liable to defaulting on their loans.

“You’re on this mania curve. At some point in time there’s got to be a leveling off,” said Borg on CNBC’s Power Lunch. Bitcoin has proven extremely resilient this year, shaking off negative news such as a Chinese cryptocurrency exchange crackdown without much fuss. It is not inconceivable, however, that a major global event, such as legislation emanating from the U.S. or South Korea, could send the price of bitcoin plummeting.

Newcomers to bitcoin have yet to experience a bear market. While bitcoin’s volatility is much gentler than it was in its earliest days, the cryptocurrency is still prone to swings, and like any asset is perfectly capable of heading south. Homeowners who mortgage their property and profit handsomely from bitcoin’s rise will feel rightfully vindicated. Not everyone can be a winner however.

When bitcoin was first born, many of its earliest adopters saw the peer-to-peer currency as a “bank killer”. It would be ironic if the digital currency’s rise – and subsequent fall – was to take a bite out of the banks due to a credit craze fueled by bitcoin.

https://news.bitcoin.com/americans-taking-mortgages-buy-bitcoin/

So you see, people who are very much against Bitcoin in the first place are now doing all panic buying just so they could multiply their Bitcoins. We just have to remember to take things little by little because all great things were once gone unnoticed. Nonetheless, I never had to do mortgages to add more to my Bitcoin wealth. I was too afraid to borrow at first but I learnt to handle it by realizing how strategic it is to obtain more funds for the benefit of my business.   

[kueyen]

Taking out loans to invest money is never a good idea, whether you are investing in cryptocurrencies or other financial instruments. Especially in a very volatile environment like crypto, you should be investing an amount of money which would not hurt you financially even if you lost all of it.

[darkangel11]

This is worrying. If this becomes a widespread trend, we definitely are in bubble territory. there are stories about people who sold their house, went all-in on Bitcoin and became millionaires. But that doesn't mean others should try to adopt the same strategy. Not everybody can afford to take such a big gamble.

That's why smart people are investing only what they are able to lose. You aren't able to lose loaned money, because it will turn you into a slave for another 20 or 30 years, but if people are willing to take such risk we can't do anything but watch. People are gamblers, it's the naked truth. Many years ago I remember watching people who were taking loans in foreign currencies because they were told the payments will be smaller and it's worth trying. A couple years later the currencies went up in value and their installments doubled and idiots went crying to the government saying the banks didn't tell them it could happen boo hoo.

[BitHodler]

Not really surprised about this. I have seen people do weird things to obtain the higest possible capital to be invested. Some people sell everything they have, and others take out mortgages.

The only dangerous part is that if they do it once, they'll likely do it another time as well. These people don't see how much risk they expose themselves to, and for that reason will keep doing this in return for quick wealth.

I can't even imagine how it must feel when you put everything at risk and you just blindly assume that the market will go up. Every downward fluctuation will be something that keeps you awake all night.

How can someone even live like that.

[gentlemand]

The only dangerous part is that if they do it once, they'll likely do it another time as well. These people don't see how much risk they expose themselves to, and for that reason will keep doing this in return for quick wealth.

I think it can only happen once. After you've done something that stupid you've either learnt your lesson or you don't have any money or credit to attempt it again. I'm pretty sure the people most prone to doing this will also be the first to sell as well.

If you'd taken a loan in 2013 you'd be humongously up by now, but most will have cracked long, long before.

[Joezepy]

I'm new, I'm bullish on it, I bought it recently.  But not more than I'm willing to lose.  Looking forward to learning more here.  Thx.

[veleten]

it is a worrying trend indeed,bubbles are not fun
also the ones who are betting it all on bitcoin now are right-there is so much more growth potential
but this growth can be exponential or steady and consistent,I'd rather prefer slow growth
but this works wonders for mass adoption,many people hear about bitcoin from the news or even damn reddit stories
bubble or not,it is not going to crash any time soon,so buy and HODL

[bambazamba]

Buying bitcoin at this time when price is skyrocketing is totally bad decision, further you using mortgages to invest in Bitcoin is the next foolish step you have stepped in. As, everyone knows that Bitcoin is highly risky investment, you should not get influenced by the blind followers about Bitcoin future and analysis yourself. My only advice is that you should read more about Bitcoin and its movement before taking such huge step which can lead you to problems than profit from bitcoin.