Never take loans for investments
I recently had one of my friends ask me about this. As the crypto market is bearish now, he wanted to take a loan and purchase some crypto assets. I initially thought it was a good decision but then thought that it may not be good as crypto markets are not predictable. There is a high chance that people might get successful but there is also a small chance that people might lose their money.
Considering all these factors I consider taking a loan to make a crypto investment is not a good decision, especially in India. There are a few countries where loan interest rates are very small so it can work out in those countries but even in that case the investment value goes in the negative direction, and people will not even be able to recover their initial investment or the capital. So, it must not be good in any case to risk your loan capabilities for investment purposes.
Crypto markets are volatile
The first primary reason why I'm against this is that the price of cryptocurrencies is not predictable. Even if we invest in stablecoins and wait to get a decent return from them anything can happen in the crypto world. One of the recent events like the one that happened to Terra Luna can destroy our investment value. It is good to refrain from taking loans for the sake of investments.
Sometimes we might think that this is the market low and we are entering the market at the right time. Imagine people who would have bought BTC when the price was around 50k. They would have hoped it to reach 100k but it did not happen and now considering the current price of BTC which is around 20k, we don't know much more time it would take for the price to heal back to 50k. It can even take years.
Invest only the money that we are ready to burn
This is the best strategy. It is always good to rely only on the assets we have and then on the money we don't have. It can be really positive when we take a loan and invest but without the ability to predict the future, things can go in any direction. It is always better to be cautious about it.
The money we allocate from our real life for the purpose of investment should be something that we afford to lose. Even if that money doesn't come back to us, our quality of life should not be affected. This is how investments should be planned.
On a final note even if we decide to take a loan, if we don't care about the returns from the money and if we are in a good place to pay the loan back, then we can take the risk. Some people have enough money in hand but still, take a loan for security reasons and use that money for investments. That is also a wise move.
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If you are smart and responsible, and buying the right assets, it's actually not a bad way to increase your holding.
For example. If you get a loan at say 10% then immediately go and put it into HBD, then put that into savings at 20%, well then you have a very low risk investment and making 10%.
Or you can go now into say cubdefi and put it into BHBD/BUSD and earn currently 38% on that which after loan interest would be 28% profit. Then you just the earnings to pay back the loan and keep the base assets. Then once the loan is paid off, it is 100% profit and pure passive cash flow.
Where I messed up was using allot of UST, lol... Yeah, let's just say I will never trust another algo stablecoin other than HBD, even though it has it's moments, lol.
So really it depends on one the person, and two, the investment.
I mean, that's how the real estate game is played, why not do it with crypto? Just make sure to be responsible with it. If you tell me you want to take a loan to go and by DOGE or SHIB, I will laugh at you, lol.
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Yes, Taking a loan to invest in crypto is a very idea. That's because its very unpredictable. And by that time, the loan will be doubling because of the interest. It will lead to a big emotional and psychological trauma. The best money to invest in crypto is our 'spare money '. So that whatever happens, you know its a worthy risk.
Taking out a loan for crypto investments is not really a good idea. Sometimes, the euphoria of the market does make it seem like you're missing out so you try doing whatever you can to join the hype from the crowd. Crypto is one of the most volatile assets, don't take the risk especially if you can't afford it.
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Said very well, I've a story of mine. Lemme share
I took loan in DeFi - right after taking loan i felt insecure like panic or wasn't feeling it's a right decision i paid back loan - wasted $5 this way but later got to know people who took loan when i did they all Got liquidated and stuck
Since then i never took any loan and won't do it.
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Taking a loan out to buy crypto is an advanced strategy that most people should stay well away from because of the risks. For most people, take whatever loan repayment amount they could afford and dollar cost average into crypto instead.
This is exactly what I used to tell my close friends that they never borrow to invest in cryptocurrency because you can't actually predict the market. I'm grateful to hear from you.
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It is a good idea to take a loan for investment, but the basis on which it is done determines whether it is an intelligent move.
If you are a person that cannot deal with losing the amount of money you want to loan, your idea may just be shit, as if the market crashes against your expectations, you'd be in a ton of mess.
But if you are one that normally has the kind of money you want to loan or can easily earn it back, then it might as well be a brilliant move, if you play your cards right and determine when to enter the market.
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I agree with that outlook. Leverage is a beast but it can work against you based on which direction the price heads. I just don't think it's worth the risk to take out a loan.
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