Taking Out a Loan to Buy Crypto is a Really Bad Idea

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The crypto world is full of people who made millions by being early movers and buying Bitcoin back when it was worth just a few cents. Now Bitcoin is on the move again, more and more people are looking to get as much exposure as possible in hopes of getting rich quick and living the high life. Unfortunately, many of those wannabe crypto millionaires are taking an extremely risky path and taking out huge loans they simply cannot afford and risking it all on crypto.

A Double-Edged Sword

Taking out a loan to buy crypto is an incredibly bad idea, but if you know what you’re doing and you time the market perfectly you can make a killing. On the flip side, just as easily as you can make a ton of cash, you can lose it all and be left owing someone a lot of money. One Twitter user recently admitted to taking out a loan that’s way more than he can afford to pay back and is gambling it all on XRP. If he manages to time the market well, he could make an absolute fortune in a very small space of time, but equally he could find himself in a huge hole if XRP decides to nosedive.

Not Learning from Others

Back in 2017, people were taking out loans left, right and center in the hopes of making a killing. One Reddit user by the name of Cryptohomie took out a $140,000 loan with the goal of investing it in altcoins and making $140 million. However, just days after he invested every last cent, the crypto markets crashed, leaving him down more than 85% a year later. While crypto markets have recovered significantly since the lowest lows of 2018, Cryptohomie will likely have had to accept his losses and file for bankruptcy.

Consider Leverage Over Loans

Rather than taking out a huge loan with the bank, crypto traders can consider using leveraged crypto trading products. Essentially the exchange lends you the difference so you can place a larger trade and pay back a bit of interest while keeping the massive potential gains. Liquid exchange launched 100:1 leverage on Bitcoin trading, meaning for every $100 you want to trade, you only need $1 in your account. Unfortunately, leverage trading is just as dangerous as taking out a loan as you’re gambling with money you don’t have. In a bid to protect citizens, the EU has capped leverage trades in crypto at 2:1. Leverage is better than a loan, but it’s not much better.

Hopefully, @XRPBallzD33p manages to shake off his greed if XRP manages to rise, but when investing out of greed things tend to go badly. There is a good chance @XRPBallzD33p could make a fortune, but it’s still a very risky move. Never take out loans to buy crypto and never trade with money you need for daily living – only ever trade with what you can afford to lose.