In all risky investments, borrowing your capital is obviously the worst option. Some may have profited from it but a lot are actually losing in the end from doing it. That is why borrowing or taking a loan is a big NO especially that you are still starting to learn to invest and you could experience more losses at first than expecting instant gains. So buy at your own risk using your spare money, not from the money of other people.
Borrowing - you are owning
Investing in Bitcoin(Cryptocurrency) - taking risk
Outcome of investment = Amount borrowed and invested -+ Possibility of Market bull or bear
Example one:
If you borrowed $15,000 from the bank with interest rate of 10% per annum(tax inclusive). If you invested the whole fund to buy Bitcoin at the price of $30k, what will be the outcome of investing in Bitcoin
Parameters
Amount borrow and invested: $15k
Worth of Bitcoin: 0.5btc at $15k
Interest payable per annum: 10%
Note: 10% of $15k is $1500 to be paid as interest annum.
If the market goes bear(downward direction) If the price of Bitcoin falls by 20% after a year(annum)
Outcome of investment = Amount borrowed and invested - Rate of the bear(%)
Outcome of investment = $15k - 20%(worth $3k)
Outcome of investment = $12k balance
Outcome of investment = $12k - 10%($1500) interest payable
Outcome of investment = $ 10,500
Outcome of investment = -$4500
A total lose of -$4500 leading to more debt incurred.
If the market goes bull(upward direction)If the price of Bitcoin rise by 20% after a year(annum)
Outcome of investment = Amount borrowed and invested + Rate of the bull(%)
Outcome of investment = $15k + 20%(worth $3k)
Outcome of investment = $18k balance
Outcome of investment = $18k - 10%($1500) interest payable
Outcome of investment = $ 16,500
Outcome of investment = +$1,500 after amount borrowed + interest is refunded(total: $16,500)
A total profits of +$1,500 leading to more debt incurred.
Conclusion We need to wiegh our decisions whenever we want to go borrowing to invest in cryptocurrency. This should help us to understand the risks we are taking whenever we invest in cryptocurrency.