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Crypto Debt On Credit Cards, The Next ‘Rekt’ Cycle Looms

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Recently, leading cryptocurrency exchange Binance announced that it now allows its users to buy Bitcoin with a credit card. With the rise in debt structures across different economic sectors and also in credit card facilities, it may be a tough call to decide whether or not to purchase Bitcoin or any other cryptocurrency using a credit card; considering that cryptocurrencies are still an emerging asset class and are currently classified as unregulated and highly volatile, buying cryptocurrencies using a credit card can be a double-edged sword.

Case in point, Bitcoin had a bull-run towards the end of 2017 with price peaking to as high as USD 20,000 in December, and fell 3% in 24hrs and has since then had a retrogressed market, with many failed attempts to hold pretentious support levels. As at the time of writing, Bitcoin trades at under USD 3500 — an over 82% drop since its all-time high. This would have been a deceptive allure, had any investor been taken by the excitement of the bull run.

On the other hand, earlier that year, Bitcoin traded at average highs of USD 800 to USD 1000. Investors who got in on the action here would have made an exceeding 1900% profit at the dawn of the year’s all-time high in December. The unpredictable, speculative and highly volatile nature of the cryptocurrency market may be its special allure, however, it has in many ways proven to be its undoing as well. Given the current market trend, many players in the industry have become wary of the high-risk levels.

According to a poll by LendEDU in 2017, about 22% of investors who bought crypto using their credit cards opted to pay later, even though some of them weren’t comfortable with the decision. Although, about a year ago, banks in the US, UK, Australia, Canada, and Europe were reportedly banning the use of credit cards to purchase crypto under the guise of protecting investors. However, some banks may still allow access.

While using credit cards promotes crypto adoption on one hand as it adds to the increasing number of avenues available to acquire cryptocurrencies, the nature of associated risks far outweighs the perceived good.

According to a report, the average American credit card debt has reached new highs of 3% from the previous year, having an average of USD 6,375 per user. Further, credit card debts have reportedly amounted to over USD 1 trillion in 2017 hitting new highs ever. To be one of the 3% and add cryptocurrency debts onto the plastic card can make life unbearable if poor decisions are made.

Investors should, however, be prudent with their decisions to invest in crypto through credit cards, understanding the added risks it poses to their personal economics coupled with the already existing debt system and inherent consumer behaviors, all in the vein to avoid being rekt (wrecked).

Numerous ways to obtain cryptocurrencies continue to expand the opportunities to hold these new class of assets. BitcoinNews reported in December on how Bitcoin ATM kiosks have increased in the recent months. CoinATMRadar lists 143,399 service points accessible in over 76 countries. Each with different pros and cons, however, nothing gets closer to the US residents as the opportunity the credit card option provides. ‘Buy on credit and pay later’ would seem like a more attractive way to own these assets than having to invest hard earned money into cryptocurrency.

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