That is a crazy decision that you've just made - taking loans to invest into cryptocurrency. But hey, I am not here to have you crucified. Life is a risk and the irony of it all is that, no matter how careful we are in living life, we can never get out of it alive. Therefore, some crazy risks, such as the one you are about to take, might be worthwhile in the end. In this article, I share with you some of the things you must do if you decide to invest in cryptocurrency with borrowed funds. Here we go:
*Bitcoinexchangeguide.com
Make Sure You Are Buying Bitcoin
Bitcoin is the true king of cryptocurrencies and it might remain this way for a very long time. This is because Bitcoin has the highest stock-flow ratio of all the present day cryptocurrencies. It is more or less like a digital gold and its price will keep rising as its supply diminishes over the years.
So, if you must invest cryptocurrency with a loan, your best bet is to invest the money in Bitcoin especially when the market has corrected significantly and reasonably well.
Make Sure You Have Other Reliable Means Of Paying Back
Because of the erratic nature of the cryptocurrency market, you must ensure that you have a reliable means of payment offline. You cannot predict the crypto market, at least in the short term, so it is only wise that you do not rely upon it to make repayment. You could go bankrupt if you dare invest in cryptocurrency using borrowed money without having an alternative means of making repayment.
If you know that you do not have a viable means of making repayment that is independent of the success of the crypto assets you are investing it, then it is better that you stay away.
Don't Ignore Dollar Cost Averaging
Dollar cost averaging is simply an investment strategy that helps you to mitigate the impact of volatility on your investment. In your own case, you might split the entire loan into three in the ratio of 50:25:25. You could invest 50% into Bitcoin in the first instance while the last two installments might come into the picture if and when the market dips to a certain extent. This will help to favourably average your entry point into the market.
Ensure That The Loan Comes With A Reasonable Interest Rate, If Any
Preferably, because of the volatile nature of your investment, your loan should come with zero interest. And if you are unable to secure an interest free loan for your crypto investment, then you are better off taking a loan that comes with a reasonable interest rate of not more than 15% per annum. This will reduce the economic impact that a bear market might have upon your personal finances peradventure there is a dip after your investment.
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I was just telling my friend that if I have the money, I would invest in Bitcoin. Not now, maybe during its next round of correction. It is difficult when it comes to borrowing money. Friends might end up as 'someone I used to know.' Banks want collaterals. Illegal money lenders? You might end up in a lot of trouble. :-) So better to just invest with money one can afford to lose. :-)
That is the safe and cautious advice, which is not bad. The best thing might be to stay away but for those who can take calculated risks it might pay off by daring to take a loan. @jphamer1 just confirmed it worked for me. Ive also done it in the past and I had my high moments as well as low moments.
I am glad it worked for you. I have said you are level headed didn't I? :-) You did your homework and you are on top of things. I guess you are probably one of the 10% of investors who succeed. :-)
i took out a 20k loan to buy litecoin at 1.2 dollars
OMG you made what would seem like one of the best investments in history. I admire your courage and risk appetite.
after watching it fall from 48 dollars all the way back down to a dollar the risk reward ratio was just off the charts. It was cheaper than when i first entered the game when litecoin was 4 or 5 dollars so i couldn't believe what i was seeing. It halved shortly after that and rocketed to 8 dollars which seemed like a moonshot after the misery and despair that had been at play. It taught me a lot and hive at 14 cents is just the same as litecoin at 1 dollar. Unless a blockchain is dead the coin is very much alive and well.
I don't think I was yet in Crypto during the Litecoin price history you just narrated. I'm happy that it paid off for you in the long run.
I very much agree with you on this. Thanks for the reassurance. I bought some 8k Hive recently and I hope that it does pay off in the long run nearly as your LTC investment did. It will be nice to still see Hive at a cheap price by January when I can buy more.
PS: I asked a question on your post but I am not sure that you saw it. So, permit me to ask again. With the present market of Bitcoin, at what price range can you be confident enough for a re-entry if that re-entry must happen ahead of this new bull run?