Credit Card Use in Crypto Investing?

A lot of people are having problems with cryptocurrencies recently. In fact, a lot of people consider the cryptocurrency bubble has begun. As Bitcoin slides below $9,000, one has to wonder what happened to all the people who bought into the hype during the Bitcoin’s peak somewhere around $19,000?

If you ever heard of the adage invest what you are willing to lose, it seems that a lot of people are willing to take greater risks for the chance to profit. There were reports from Business Insider and Bloomberg wherein both sites mentioned that JP Morgan, Citi, and Bank of America are all stopping people from using their credit card in purchasing cryptocurrencies.

And can’t it be ironic that someone is using a credit card which offers fraud protection, to invest in something that doesn’t have any?

Dangers of Investing Using Your Credit Card

The average interest rate of credit cards is at above 16%. This is something that a lot of people don’t really consider. In addition to this, Bitcoin and all other cryptocurrencies are highly volatile. It simply means that you should be prepared to lose your money at any given time. But also, you can hit the jackpot at any given time of the day.

But then again, for a lot of people who invested in cryptocurrencies, many don’t even understand blockchain technology. And also, there are people who really don’t have the resources but still decided to invest in cryptos. And the worst part is that a lot of them entered the market when the price was soaring up until around mid-December of 2017.

Rise in Credit in November

The Federal Reserve has reported that there is a rise in the record of outstanding credit card debt in November. Though you may argue that it is simply from traditional holiday shopping spree, one has to wonder if Bitcoin and crypto investing has anything to do with it.

So why did banks feel that they need to stop the credit cards being used for cryptocurrency investing? Were there more people using their credit cards for crypto and not being able to pay afterward?

Bitcoin Newbies Are the Most Affected

The hardest hit has been those individuals who entered the market a bit too late. These newcomers are mostly individuals who invested for either quick profits or due to fear of missing out. And as more novice investors joined, Bitcoin was somewhere above $10,000. Then the next thing we know, it almost reached $20,000 in a span of a few week.

Billionaire Mike Novogratz, who planned to open a $500 million crypto hedge fund changed his plan to build a crypto merchant bank instead. He warned as well that Bitcoin could actually fall for as low as $8,000.

You can blame tightening regulations to be one of the reasons why Bitcoin and other cryptocurrencies are having a bearish trend. Thomas Lee of Fundstrat mentioned that “Investors are staying on the sidelines until there’s some visibility, but nothing fundamental has changed. It’s healthy; you need drawbacks sometimes as nothing goes up in a straight line”.

What is in store for Bitcoin and other cryptocurrencies for 2018? If you are not ready for the worst, then perhaps, crypto investing isn’t really for you.