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Another scenario is not to take loans in order to buy Bitcoin. You have to return loans by selling Bitcoin and you never know the price of Bitcoin in immediate short term.
I have my reservation of people's attitude towards loans and its purpose in investments. There is what we call good debts, which is a debt you can get into in order to have an advantage and it is what you can pay back without much problems, the issue comes from when you have to depend on your bitcoin investment to pay the loans and this is never a good investment practice. In fact, it is a dangerous trading practice. Let me cite an example to drive home my point.
Whether a good debt or a bad one, it would be surprising when a newbie or someone that claims to be an entrepreneur uses all his funds to invest in cryptocurrency when the hope that the price is going to appreciate as soon as possible and his going to start making profits within little time.
This is the way many investors especially the ones that are new in the crypto space. Experience and knowledge works together which is why it's good to ask questions, I mean a critical question when making a financial decision. This involves money and it's important for anyone that wants to invest in cryptocurrency to understand thoroughly what they intend to put the money so they will not have problem after investing. It very important for every investor to have a backup funds which is necessary for any emergency case.
We are currently in a dip, an investor who regularly invests $200 weekly and wants to take advantage of this dip can take a loan of lets say $5,000 with an interest rate of 5% in order to buy more quantity of bitcoin at this reduced price. Now, this $5,000 is equivalent to 6 months and 1 week of his normal accumulation timeline if we go by 4weeks for a month calendar and possibly, he spreads the repayment to about a 9 month timeline. The totality of what he is to pay is $5250 and spreading it across his 9 months timeline would see him repaying approximately $146 monthly while he still has $54 to continue his DCA.
Where do you think one can get a loan with an interest rate of 5% and for how long? I asked you because I've not really seen that and for how long. Your Narative is actually wrong because I am still contemplating who is going to give you a loan of 5% to pay all in 9 months. Most loan I've been seeing is between 15% and 35% depending how long it's going to take you to clear the loan.
Just imagine getting a 5k loan with an estimated interest rate of about 15% to 25% although this could depend on your region and what platform you are using to get the loan.
If you multiply 5k × 20% to be paid within 9 months timeframe. That means you are paying 1k extra making it 6k to be paid.
The question here is that what's the assurance that you 5k investment could worth more than 6k in 9 months timeframe. You know that the market is unpredictable and it would make sense to take risks without proper planning for backup funds which is very important.
He has won on two sides, the fact that he bought more quantity at a reduced price and the fact that he keeps adding $54 to his portfolio even while repaying the debt with his supposed accumulation budget. He might hit more money and pay off the debt before the 9 months timeline and return to his normal accumulation amount which is $200 weekly or increase his aggressiveness if he is able to. He definitely would have more amount of bitcoin than someone who is just accumulating $200 weekly for the said period of time peradventure the price of bitcoin surges upwards.
Good debts have a good advantage and can be helpful as far as it is what we can afford to pay effortlessly.
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