Man Borrows $325,000 to Buy Bitcoin - Investment or Gambling on Life Savings?
An online community user going by the online alias gingerbreadfutters who has an undisclosed terminal disease, recently purchased $325,000 worth of Bitcoin as the digital currency achieved a new all-time high at $1,700.
Bitcoin price has increased significantly since then, reaching $1,866 as a global average across major markets on May 11. However, users in the online community wherein ginerbreadfutters made his announcement harshly criticized his decision to all in on Bitcoin after they discovered that he obtained the capital through a loan.
To be specific, gingerbreadfutters acquired an equity loan of $325,239 on his house in order to purchase 191 Bitcoins.
He stated:
“I decided to make my newest lunge, using what equity I have accrued on my estate over the past 10 years since the 2008 financial crisis. If Bitcoin reaches the 10k mark — which I see as a distinct possibility, or I would not have taken such a risk — I plan on moving to the West Coast and getting away from all the angry people here where I currently reside.”
Investment or gambling on life savings?
An equity loan is a type of loan in which the equity of the borrower’s home is used as collateral. In other words, gingerbreadfutters is gambling on his life savings that is his real estate and betting yet another $325,000 obtained by using his life savings as collateral to make a mid-term profit on Bitcoin.
More to that, gingerbreadfutters told his online community that he plans to sell all of his Bitcoins once Bitcoin price hits $10,000 and purchase new real estate on the west coast.
However, the community criticized gingerbreadfutters’ extremely risky and frankly foolish investment strategy. Investors should always prevent from initiating risky investments for short and mid-term profit because there are potential situations wherein investors may be in urgent need of capital but their assets or money are locked up.
Bitcoin is a highly liquid asset, investment and currency to posses. But, if gingerbreadfutters makes a slight mistake in his calculations and plans and risk his life savings, the entire mid-term Bitcoin investment strategy could end up as a disaster.
A tip for potential investors - always consider the risks
Another online community user with the alias Dispairsquid16 efficiently analyzed gingerbreadfutters’ situation and investment mindset with an analogy:
“Almost like a high school chemistry teacher deciding to begin making and selling crystal meth due to a change in life circumstances.”
Gingerbreadfutters realized that he will not be able to live a long life due to an undisclosed terminal disease and thus, acknowledging that he has little to lose, he gambled his life savings and a massive debt obtained using his life savings as collateral to investment in Bitcoin.
For any potential investors planning on investing in Bitcoin, it is an extremely risky approach to gamble a large amount of money on Bitcoin’s short and mid-term price trend.
That would be gambling on borrowed money.