Most investors using credit to buy cryptocurrencies

Across age groups, 64% of crypto investors used credit facilities to fund their purchases, but older age groups were found to be less likely to do so.

Over a third of 2,000 people surveyed used a credit card to invest in cryptocurrencies, while almost a fifth used their overdrafts.

Nearly 15% took out a personal loan, while some 9% used a secured loan to buy crypto assets, according to the report.

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Holly Andrews, managing director at KIS Finance, said: “In recent years, the cryptocurrency industry has grown rapidly and cryptos are becoming a more mainstream product every single day. Even tech giant PayPal has now introduced a cryptocurrency trading platform, making it accessible to everyone.

“Although cryptos, and specifically Bitcoin, have seen people make thousands or even millions in profit, the last few weeks have shown that they are incredibly volatile and can see investors losing large percentages, or all, of what they put in very quickly.”

She added that it was “concerning” to see so many people using borrowed funds to buy cryptocurrencies, stating that they are “extremely unpredictable” and offer “no guarantees” that the money invested will be returned.

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KIS Finance’s report highlighted the massive losses seen in crypto over the last couple of months.

Despite Bitcoin hitting its highest price ever in November 2021, cryptos have been falling in value since, the firm said.

As of 10 January, Bitcoin has fallen by 40% compared to two months ago, while other major crypto currencies Ethereum, Litecoin and Ripple have declined by 37%, 56% and 45% respectively.

“With a very strong possibility of losing the money for good, people may be left severely out of pocket and racking up interest on their credit cards and overdrafts,” said Andrews.

“Also, some credit card providers will view this type of transaction as a cash advance, meaning a cash advance fee and higher interest rate will be applied.”

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The data, collated by KIS Finance, showed that people aged between 18 and 24 were the age group most likely to use borrowed funds to make their investment with 70% using some sort of credit, followed by people aged 35 to 44 with 68.9%.

People aged between 25 and 34, as well as those in the 45 to 54 bracket were also heavily inclined to borrow money to buy crypto, with 64% and 62.5% respectively doing so.

There was a significant drop of borrowers in the two oldest age groups, 55 to 64 (45%) and 65+ (25%).

KIS Finance pointed out that although the cryptocurrency industry is currently “in the red”, overall it is “growing everyday”.

In June 2021, UK watchdog the Financial Conduct Authority warned on UK crypto use despite gaps in understanding on how the digital asset works.

According to research carried out by the FCA, the number of adults in the UK who own cryptoassets was estimated to be 2.3 million people in 2021, up from 1.9 million in 2020.