Cypto Crash is a ‘double whammy’ for young debt investors

  • Young investors face a “double whammy” of losing crypto investment and rising debt, Interactive Investor said.
  • The company’s study last year found that many young adults were using credit cards and other loans to buy digital coins.
  • The crypto crash has wiped over $300 billion from the market so far this week.

The crypto selloff that wiped hundreds of billions of dollars off the market this week is likely to hit young investors particularly hard, Interactive Investors said on Thursday, noting that nearly half of UK young adults have chosen cryptocurrencies as their first choice. asset class in which to invest.

The Panic Sweeping the Crypto Sector After the Stablecoin Collapse TerraUSD erased $310 billion from the digital asset market between Monday and Wednesday, according to figures from CoinMarketCap. Crypto prices continued to fall on Thursday, with bitcoin down 3% to $28,512.28 and ether, the Ethereum blockchain token, down 11% to $1,955.68. TerraUSD, the flashpoint of the current market downturn, was recovering ground but at $0.59 was still below its $1 peg.

A culmination of long and short-term factors drove the sell-off, including concerns over regulatory and security breaches as well as pressures in traditional financial markets such as geopolitical uncertainty and rising interest rates. interest in the United States, according to online investment services company Interactive Investor. .

“Whatever the reason, the crash is a hard pill to swallow for those who have made their very first investment in cryptos,” wrote Myron Jobson, senior personal finance analyst at Interactive Investor, in a note.

A study by the firm in June 2021 found that 45% of young adults between the ages of 18 and 29 have made crypto their first investment of choice, with “an alarming number of funding through a cocktail of credit cards, loans students” and other loans.

“The concern is that many have been hit by a double whammy of lost investment and a deeper plunge into debt. The debt problem is compounded by rising interest rates,” he said. he declares.

A fifth of all 18-29 year olds who responded to the survey said they had invested in bitcoin at some point. Half of them took on debt to finance their purchases, 23% using a credit card, 17% using a student loan and 16% using another type of loan. The company said that 27% of dogecoin buyers used their credit card to purchase the meme coin.

And since this investigation was taken, the


Federal Reserve

and the Bank of England began raising their respective benchmark interest rates to bring down high inflation. US inflation hit 8.3% in April and the BOE has warned of inflation topping 10% this year from its current rate of 7%.

Credit card borrowing hit a record £1.5bn ($1.83bn) in February 2022, the BOE said in March. The average annual interest rate on credit cards in the UK exceeded 21% at the end of 2021.

“Bitcoin, and the broader cryptocurrency story, are far from over, but the selloff reflects the high risk and volatile nature of cryptos,” Jobson said.


volatility

part of the growing pains of the relatively new crypto market, the tumult of price action has left investors flabbergasted.”