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Urgent Stock Market Message

Banks Ban Bitcoin Purchases Using Credit Cards

Currencies / Bitcoin Feb 09, 2018 - 03:03 AM GMT

By: EconMatters

Currencies

Bitcoin was at $15,000 when I wrote this post before Christmas warning against getting involved in the bitcoin or any cryptocurrency market.  Bitcoin has crashed to $8,000 today losing about 50% of its value in two months. 



However, one crytocurrency analysis also pointed out:

[It's] important to recognize is that those people that have lost money (the only people that have lost money) are those that entered the markets over the last eight weeks or so. Everyone else in the markets have made money.   

In other words, only the newbie dumb money got caught in this "Bitcoin correction" holding the bag while the whales/institution investors made boat loads of money.

Then Bloomberg reported that based on the finding of a survey of more than 3,000 people conducted in mid-January,
Nearly 20 percent of people who own cryptocurrencies such as Bitcoin went into debt to buy it, or bought it on margin. 
Theoretically, it is more than likely regular retail investors are the ones that would resort to debt finance a bitcoin investment.

Piecing them together, you come up with a very disturbing picture, that is, the ones who took out debt or margins and losing the most on bitcoins were the regular retail investors with blind faith in Bitcoin partly due to the hype by Wall Street and mainstream media.   

This is also further evidence of the major pain to come particularly for many retail investors.  I wonder just how many of them took out debt to buy bitcoin near its peak?  And how many are taking out more debt to invest in Bitcoin right now since it is on a 50% off sale?

With Bitcoin losing so much in value, I imagine some of these 20% bitcoin owners are unable to pay back the debt.  Some of them probably already got liquidated by their brokers.  It is like the gambler's mentality, you need to gamble more to win back all the losses.  What is the most readily available source for a non-institution retail investor to get the money to place more bets?  Credit cards.

Worry not, banks see that risk miles away.  That's why banks including Citigroup, JPMorgan, Bank of America have banned purchases of Bitcoin and other cryptocurrencies on their credit cards.
The banks are worried that borrowers may not repay, and that protections they offer shoppers could backfire. 


If banks have lost faith in bitcoin, then investors should also take notice before jumping in again.

According to Bloomberg, analysts also blame the credit tightening as being partly responsible for the downward pressure on prices of Bitcoin and many other cryptocurrencies.

Honestly, for an asset class that should not have been elevated to such status to begin with, crash is only a matter of time.  You can blame many things fundamentally wrong and contributory to its crash correction, but no, banks being banks tightening credit should not be one of them.           

By EconMatters

http://www.econmatters.com/

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2018 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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