Bitcoin correction a wake-up call for those who borrowed to buy
Cryptocurrency sell-off comes on the heels of a wave of borrowing to buy bitcoin.
People who have taken out mortgages or home equity loans to speculate on the price action of skyrocketing bitcoin made waves this month, but they may be thinking twice after a recent correction brought bitcoin down from its peak of nearly $20,000 to a low early Friday of just above $11,000.
North American Securities Administrators Association president Joseph Borg called bitcoin’s surge to $20,000 a “mania” and cited instances where investors have taken out loans to get in.
“We’ve seen mortgages being taken out to buy bitcoin. … People do credit cards, equity lines,” he said in a recent CNBC interview.
“At some point in time there’s got to be a leveling off,” he added, and that point may have just arrived.
The extreme volatility of bitcoin and other cryptocurrencies presents real and sometimes significant risks, as bitcoin borrowers are currently realizing. Check out our guide to what could happen if you can’t pay back a payday loan, for example. And learn how to avoid defaulting on a loan.
While the bitcoin correction – and similar sell-offs for cryptocurrencies across the board – has brought prices back closer to Earth, Borg admitted that the world of cryptocurrencies isn’t going away.
“Cryptocurrency is here to stay. Blockchain is here to stay. Whether it is bitcoin or not, I don’t know,” he noted.
Read more about what analysts are saying about the bitcoin correction, including whether or not bitcoin prices will bounce back up, and check out our complete guide to the world of cryptocurrencies for more insight into this complex and speculative market. As you learn, keep in mind that past performance is no guarantee for future price movements.
The advantages of a soaring bitcoin price are obvious. But the digital coin’s volatility isn’t its only drawback. There are also rising concerns about the escalating energy demands on the bitcoin network.