The cryptocurrency space is expected to reach 1 billion users in 2030. While some have been known to make a fortune off of it, others have ruined their finances, chasing similar results, going as far as getting credit to buy crypto by putting up valuable assets, including their homes, as collateral.
Borrowing to invest can make sense under very specific conditions, but using a home equity loan is also extremely risky. For example, it means that an investor’s home is being put up as collateral on loan.
The CEO referenced fintech startup Milo, which offers 30-year crypto-mortgages and allows users to leverage their cryptocurrency holdings to purchase real estate as an option, and added:
“I personally would not go all out and ‘maximize’ by putting all my earnings into Bitcoin. That’s basically putting all your eggs in one basket. This is a super high risk allocation of capital.”
Rust added that for investors with a family to take care of and bills to pay, mortgaging their property “might not be the most advisable strategy.” Per his words, it’s “typically best to deploy common sense and appropriate risk management.”
Investors need to recognize that cryptocurrencies are risky assets based on technological innovations. Things can change overnight, as the collapse of the Terra ecosystem and subsequent contagion to other firms made clear.
To stay safe, investors need to appropriately manage their risk, which may mean their portfolios will be “boring” for quite some time. However, this “downtime” can give them the break they need to heal mentally and improve their outlook.
