New Survey Reveals Staggering Number Of People Are Buying BitCoin On Their Credit Cards

A few weeks ago we presented anecdotal evidence from Joseph Borg, director of the Alabama Securities Commission, suggesting that people are taking out home equity loans and cash advances on credit cards just to purchase BitCoin in the hopes of getting rich quick (see: "It's In The Mania Phase": Securities Regulator Warns That "Mortgages Are Being Taken Out To Buy Bitcoin")

"We've seen mortgages being taken out to buy bitcoin. … People do credit cards, equity lines," said Borg, president of the North American Securities Administrators Association, a voluntary organization devoted to investor protection. Borg is also director of the Alabama Securities Commission.

"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."

"You're on this mania curve. At some point in time there's got to be a leveling off. Cryptocurrency is here to stay. Blockchain is here to stay. Whether it is bitcoin or not, I don't know," Borg said in an interview with "Power Lunch."

Now it seems that the speculation by Borg has been confirmed by a new survey conducted by LendEDU which found that, among other things, nearly 20% of people who have purchased BitCoin have done so using their credit cards.

First, more than half (51.78%) of respondents stated that they either used a credit or debit card to ​fund their account to purchase Bitcoin. Specifically, 33.63 percent of investors were using debit cards, while 18.15 percent were using credit cards.

Why is this concerning? The virtual currency exchanges where Bitcoin is bought and sold will charge conversion fees when either a credit or debit card is used to find an investor's account. Coinbase, the largest of the cryptocurrency exchanges, charges a conversion fee of 3.99 percent when a user uses his or her credit or debit card to bankroll their account.

Obviously, this is not the most financially-savvy move on the part of of a sizable percentage of Bitcoin investors; no one ever wants to pay extra than what is necessary, especially when dealing with something as volatile as Bitcoin. The wisest and most frugal way to fund a virtual currency exchange account would be through an ACH transfer, which is completely free of charge. Only 18.60 percent of our 672 Bitcoin-invested respondents were paying for the cryptocurrency in this fashion.

BitCoin

Meanwhile, nearly a quarter of the folks who bought BitCoin using their attractive 25% loans admitted that they're now stuck rolling their new debt month-to-month...

However, this was not even the most pressing concern coming from the LendEDU poll. That recognition belongs to this data-point: 22.13 percent of Bitcoin investors did not pay off their credit card balance after purchasing Bitcoin.

Going into debt to buy Bitcoin is not a wise decision no matter which way it is spun. There is no guarantee that Bitcoin investment returns will be profitable in the long run, but one can guarantee that the credit card company will need to be paid back. Considering the average annual percentage rate (APR) on a credit card is 15.07 percent, a Bitcoin investor that finances their investment at the wrong time will find themselves in serious debt.

Bitcoin

And while that fact should be deeply troubling to anyone with even a modest understanding of basic financial concepts, apparently the average American BitCoin buyer is more than eager to continue buying up the digital currency using 25% loans.

Bitcoin

Of course, there is no risk in these transactions because BitCoin will just always go up in perpetuity, right?  After all, making massively-levered, speculative bets on bubbly assets pretty much always works out well...just ask home flippers from 2007.

 

Comments

Miggy warsev Jan 13, 2018 8:16 AM Permalink

I don't believe this rhetoric for a minute about the mortgaging of homes, etc.

1. The infrastructure is in place for Bitcoin to be mainstream. It has been tested for years by the players.
2. The test has completed (blockchain) and the insiders (big money) know the testing has been favorable and are getting in early causing the huge rise in price.
3. The price has caused notoriety and the public is taking their shot at it causing it to rise more.
4. It is rising too early, too much. The trading desks and control is not in place. Countries under the thumb need to outlaw the mining so control can take place. This is where the control and money is at.
5. The controlled media is doing their part to say Bitcoin is dead. It is a loser. Get out now while you can.

Please disagree with me. I may be very wrong I will admit that. Countries sure are taking notice of a vehicle that is supposed to be dead in the water.

My humble bet is on Bitcoin. If I lose the small amount I would have blown it on something anyway. If I double or even triple the ride was fun.

In reply to by warsev

Miggy rrrr Jan 13, 2018 10:07 AM Permalink

I will not disagree with a bubble.

 

My humble opinion is Bitcoin is not only not in a bubble, it is in it's infancy. Demand is being suppressed artificially until the right time. Again, I may be wrong and debate is nothing personal. Only a select few know for sure. I just try and put pieces together.

In reply to by rrrr

zebra77a The_Juggernaut Jan 13, 2018 5:31 AM Permalink

It's a fascinating scenario.

If the federal reserve had allowed real inflation and real interest rates, and not ballooned the debt instruments to the moon crypto would of never taken off.

Now - crypto will never be stopped.

--THOSE WHO TRADE CRYPTO REMEMBER --

  • Know your cryptocurrencies.  A blockchain of Monero cannot transfer directly to a blockchain of Bitcoin.  Probably 99% of the public that holds bitcoin or a crypto do not understand how they actually *work*. In order for you to 'sell monero and buy bitcoin' means that ALL EXCHANGES must make virtual accounts that sit in the middle. Which means the 'money' and 'inventories' on an exchange are open to all manipulations.  Which means the exchange can make up a fake account and a fake balance and trade against your positions, shadow spoof, naked short, just like the FOREX brokers did. Which means the 'real value' of bitcoin can be whatever they want it to be.  From this you can see one exchange pricing bitcoin $3000 off another. They can game it until you withdraw it - which forces them to rechain your balances to the blockchain. Until your cryptocurrency is paid back out of the exchange to an offline wallet or a local node (re-chained to the blockchain), or paid back to your local regulated bank, the exchange has full control of YOUR money, and they are 100% unregulated in most cases.   When in doubt an exchange can blame a 'hacker' and close out the accounts and keep all the money... Worked for Mt. Gox. Seems to happen lots..
  • Bitcoin has a transaction limit of 6.7 transactions per second, and transactions now cost $50 US in equivalent to execute on the blockchain. Visa in comparison can do 20,000 transactions per second during Christmas binges. Bitcoin is an escape store of wealth, it is NOT useful for common transactions like buying coffee and groceries and never will be.  Bitcoin could even become the world reserve currency replacing the US dollar and gold.
  • 53% of all bitcoin wallets (15,000,000+) have a net balance of <= .001 BTC or ~$15 US. 75% of all BTC address have a balance < $140 US (0.01 BTC).  If it costs $50 US to make a true blockchain transaction and you invest $1000 into it - every transaction on a blockchain will see your money diminish at a rate of 5% compounding per transaction. To gamble in a North American casino will see your wealth diminish at a rate of 1.8% per spin to give you a comparative idea.  From this you can see many people buy into Bitcoin but as soon as they try to do anything the transaction fees drain their balances, and they join the drained wallet club...  https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html
  • Only <0.4% of the worlds population is estimated to have participated in a crypto currency. Demand will be VERY strong for cryptos. Although it is not possible to determine the 'real market' value of Bitcoin due to clear  exchange price manipulation, it could be easily expected to see $50,000 a coin before the end of 2019.
  • Real money investing in bitcoin is NOT on the exchanges, REAL money is directly on the blockchain buying Bitcoin inventories  and selling it TO the exchanges as they require liquidity. So real money would go buy mining production,  similar to gold, or large transaction block purchases.
  • All parabolic function curves revert to mean.  ALL. The 1929 stock market crash saw it,  as well as the 1984 Nikkei bubble, the 2014 China stock pop, and the  2000/2007 DJIA (dotcoms)... ALL saw parabolic curve reversions. We are no exception..., Eventually it will happen to us, but probably not for a while..

In reply to by The_Juggernaut

Miggy zebra77a Jan 13, 2018 10:20 AM Permalink

Good post. You are correct in point 1. That is why long term bets on any unregulated instrument are the safest. Brokers can game the system like in Forex (It took me too long to learn that in another lifetime) but in the long term they have to stay somewhat close to stay in business. Bitcoin is the perfect long term bet. Way too risky to day trade.

A test of a major broker showed approx. 6% fee to buy and 6% fee to sell. I personally have way too little bet to go to a broker not well known for a better price. There was a spread of advertised price and sell price but again, my bet is the instrument is going to take off so I am ok with that.

 

I do not know where Bitcoin is going, some do. It may become a reserve currency for the world or it may disappear tomorrow.

In reply to by zebra77a

TheRideNeverEnds T-NUTZ Jan 13, 2018 12:37 AM Permalink

You are missing a few zeros. 

 

BTC has AT LEAST another 100,000% upside before it reaches its fair value.  

 

This year it it may only  break into the low six figures but it’s already made more gains in a few years than gold has made in all of recorded history and it’s only becoming more widely adopted.  

In reply to by T-NUTZ

D.r. Funk TheRideNeverEnds Jan 13, 2018 1:33 AM Permalink

It's not a fair value scenario. That's -ridiculous-

It's a trend frenzy asset. Which may have usefulness in the future

That usefulness is still fairly uncertain and somewhat dubious however

And there are clearly games being played to begin with, -i.e.- central banks?

you dont think cb's or proxy cb's could bubble it to destroy it if they wanted? which they might be doing?

In reply to by TheRideNeverEnds

zebra77a TheRideNeverEnds Jan 13, 2018 5:00 AM Permalink

Interesting scenario.  

BEFORE : Fool and money parted at stock exchange, old money re-cooperates its debt easily..  Fool develop drinking problem and/or X take remaining assets..

NOW : Fool and money parted at Cryptos. Now old money has to go chase the money it loaned out into the blockchain a decentralized non-fungible non-controllable digit stream, primarily controlled by offshore..

In reply to by TheRideNeverEnds

Jay aurum4040 Jan 13, 2018 9:23 AM Permalink

The high ratio of debit card users vs credit card users tells what's really going on here. The fiat on-ramp exchanges are absolutely swamped with new applications and it takes days or weeks to process your KYC submissions. ACH transfers take several days to process and that's only after KYC approval. Cryptos move fast and debit card transactions don't need KYC approval. If your crypto goes on sale or starts pumping, the opportunity may be gone in a few hours, so you use the debit card. Not ideal but better than missing the opportunity altogether.

In reply to by aurum4040

Xamune T-NUTZ Jan 13, 2018 7:24 AM Permalink

And what crystal ball do you have that states that Bitcoin will rise another 1100% this year? You need not do much research to see that when Bitcoin peaked at the end of 2013 and dropped like a stone thrown into water, it took over THREE YEARS to get back to break even. What if history repeats and we go back to sub $8000 and take another 3 years to claw back? Who are you going to call "retard" then???

In reply to by T-NUTZ