Young UK investors are funding cryptocurrency investments through a “cocktail” of credit cards, student loans and other borrowing, according to a new study.
Interactive Investor, the UK’s second-largest direct-to-consumer investment platform, said a survey of 1,000 adults aged 18-29 found that a fifth had invested in Bitcoin (BTC -USD) and half were in debt to finance their investments. 23% used a credit card, 17% used a student loan, and 16% used some other type of loan.
27% of respondents admitted to using their credit card to invest in Dogecoin (DOGE-USD), 17% said they used their student loan, and 12% cited another type of loan.
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“Young adults using credit cards, student loans and other forms of debt to invest is a worrying trend,” said Myron Jobson, a personal finance activist at Interactive Investor. “We would never recommend using a credit card to finance investments.”
The Interactive Investor poll gave no data on whether young people were struggling with crypto-related debt, but the large swings in the market suggest that at least some may be.
Bitcoin peaked at over $ 64,000 in April before falling in half. Dogecoin rose from less than a cent at the start of the year to a peak of over $ 0.70, but has since fallen back to nearly $ 0.23. Any investor who borrowed money to buy near the top is probably now in trouble.
“It is possible that your credit score will be damaged if repayments are not met, which can seriously hamper your ability to get a mortgage and access other forms of credit in the future,” Jobson said. . “It’s just not worth it.”
The Interactive Investors poll found that nearly half of Gen Z and Millennial investors got their first taste of investing through crypto. Almost half (45%) of 18-29 year olds said their first investment was cryptocurrency. This was more than double the proportion who first invested via funds (23%) and the proportion whose initial investment was in shares of listed companies (18%).
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Last month, the UK’s financial watchdog saw cryptocurrency adoption snowballing despite big risks. The Financial Conduct Authority estimated that 2.3 million adults now own cryptoassets, up from 1.9 million last year.
In contrast, the level of overall understanding of cryptocurrencies is declining. Only 71% correctly identify the definition of cryptocurrency from a list of statements.
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“If consumers invest in these types of products, they should be prepared to lose all of their money,” said Sheldon Mills, FCA executive director for consumers and competition at the time.
One in 10 people who had heard of the cryptocurrency said they were aware of the consumer warnings on the FCA website. Of these, 43% said they were discouraged from buying crypto.
In a separate survey, FCA-regulated fintech Ziglu found that 24% of UK crypto investors spent £ 100 ($ 138.37) or less on their investment. 28% spent between £ 100 and £ 500, while 23% spent £ 1,000 or more to buy crypto. 5% spent more than £ 10,000.
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