Survey: Americans Borrow Money, Default on Bills to Buy Cryptocurrency

Cryptocurrency investing has been a wild ride lately.

So what happens when you combine the tempting prospect of new global currencies and unprecedentedly low prices, but you don’t have any cash to invest? Americans are turning to lenders.

And as many investors are currently adding up their losses, others are doubling down, using loans to fund more cryptocurrency purchases as they try to time the market to predict when prices will hit rock bottom.

Many of these borrowers are already struggling. More than 32% of cryptocurrency investors have used a payday loan in the past, and 11% have used a payday loan or title loan to invest in cryptocurrency, in spite of triple-digit interest rates.

Experts caution against this.

“Never take a loan to invest. Only invest money you have to spare,” says Dr. Merav Ozair, blockchain expert and fintech professor at Rutgers Business School. Ozair says potential investors should never leverage an asset — like their home or car — on a speculative investment.

“A lot of people think they can become a millionaire in a day,” she says, “which never happens.”

Casual cryptocurrency investors face several roadblocks, including market manipulation from experts and social media influencers. For example, countless Reddit posts advise potential investors to borrow money to buy cryptocurrency.

“As a retail investor, you are at a disadvantage in crypto markets,” says Robert Geoghegan, author of A to Z of Web3: Teach children about the technology behind NFTs, the metaverse, virtual reality, blockchain and cryptocurrency. “The lack of crypto regulation means markets are susceptible to market manipulation, such as ‘pump and dump’ schemes and social manipulation,” like influencers telling their followers to purchase a specific coin.

Consider the $258 billion lawsuit recently filed by a Dogecoin investor accusing SpaceX and Tesla “Technoking” Elon Musk of running a pyramid scheme to support the cryptocurrency.

Dogecoin started off as a “shitcoin,” a satirical entry to mock Bitcoin, before its market value hit $8 million and it became the seventh-largest electronic currency in the world, thanks in part to Musk’s recommendations.

There are literally thousands of so-called “shitcoins” on the market, with familiar names like Shiba Inu and ApeCoin. Unlike Bitcoin or Ethereum, which have specific, well-defined purposes, “shitcoins” lack functionalities and are considered valuable just because they exist.

There are countless articles with headlines like “Best Shitcoins to Buy in 2022,” or “The Ultimate Strategy to Invest in Shitcoins.” But Shitcoin prices usually fluctuate wildly, with short-term gains followed by nosedives as investors try to capitalize on quick flips. This makes them a poor long-term investment, particularly for borrowers who are also paying interest on a loan or credit card.

July 3 is Shitcoin Day, the anniversary of the first-ever “utility token” ICO — called Mastercoin — in 2013. To mark this, surveyed more than 1,500 Americans to study their investing habits. Here’s what we learned.

  1. Key takeaways
  2. Other findings
  3. Methodology
  4. Cryptocurrency statistics
  5. Advice from the professors

Key takeaways

We’re using loans to pay for our investments: About 21% of crypto-investors said they’ve used a loan to pay for their cryptocurrency investments. Personal loans were most popular, but payday loans, title loans, mortgage refinances, home equity loans and leftover student loan funds also have been utilized.

Hoping for a payday: 11% of previous payday loan users who have purchased crypto used a payday loan or title loan to buy crypto. Most borrowed between $500 to $1,000 to invest. Because payday loans average around 400% APR, this is a big-time gamble.

Investors are going into debt: Almost 19% of respondents said they’ve struggled to pay at least one bill due to the amount of money they’ve invested in cryptocurrency, and about 15% said they’ve worried about eviction, foreclosure or car repossession due to their investing. Among payday loan users, 12% said they have worried about eviction, foreclosure or car repossession due to cryptocurrency investing and 12% have either struggled to pay a bill or defaulted.

Other findings:

Buy now, pay later: More than 35% have used a credit card to purchase cryptocurrency, with about 20% of those paying it off when the bill came due, and another 14% are paying it off incrementally with either an 0% APR introductory offer or at the full interest rate, while 1% maxed out their card altogether. Of payday loan users, 8% bought cryptocurrency with a credit card and 3% paid it off incrementally at the full interest rate.

Counting on advice from Elon Musk: Bitcoin is the No. 1 investment for 54% of respondents, but Dogecoin comes in second at 35%. Overall, Bitcoin, Ethereum and Dogecoin are the top three. Dogecoin’s popularity is attributed to recommendations from Elon Musk, who, with a net worth of $213 billion, is considered the world’s richest man. In contrast, all but 32 of cryptocurrency investors surveyed earn less than $100,000 per year.

It’s not for everyone: 41% said they haven’t purchased or even considered purchasing cryptocurrency.

Buying, but not selling: Overall, 35% have never traded cryptocurrency or used it to make a purchase, instead, they are holding it for the long term. About 42% of payday loan users have traded or spent cryptocurrency.

An even split: 51% believe crypto is a good investment opportunity right now, and 49% disagree.

Extreme losses: Almost 5% of investors said they’ve lost $100,000 or more, while fewer than 1% say they’ve made that same amount.

Most are losing money: 52% of previous payday loan users have lost $1,000 or less, while 32% have gained up to $1,000. The majority of overall respondents also fall into the middle area, with 35% losing $1,000 or less so far, and 27% gaining that same amount.

Why we invest: Of those who purchased, about 15% bought cryptocurrencies because they considered it a good long-term investment, compared to 31% of respondents who’ve used payday loans. Among the payday loan group, 21% said they purchased because prices fell sharply, 3% cited historically low prices and another 10% said they bought it and planned to resell it before the credit card bill was due.

Clinging to tradition: 59% said they believe traditional currencies and banking will continue to dominate over the next 25 years.


DebtHammer collected survey responses from a random sample of 1,660 adults aged 18 or older. Of those who responded, 1332 were via Survey Monkey and 323 were from DebtHammer’s subscriber list. Each response was anonymized using a unique user ID and utilized a dual-level qualification system to ensure legitimate responses. Only respondents who had purchased cryptocurrency or considered purchasing cryptocurrency advanced through the remainder of the survey. Of the Survey Monkey subjects, 798 qualified to complete the entire survey. Of the DebtHammer subscribers, 109 fully qualified and 41 of those respondents had previously used payday loans. The survey ran from June 9-16. All respondents reported an annual income of $250,000 or less.

Of those we surveyed, 59% were female and 41% were male. Less than 1% identified as either non-binary/other or preferred not to say. Of respondents, 17% were age 18 to 29, 18% were 30 to 44, 37% age 45 to 60 and 26% were 60+.

Cryptocurrency statistics

  • There are 295 million crypto users worldwide across all known currencies.
  • The global crypto market capitalization currently hovers at $1.34 trillion.
  • The global crypto ownership rate is currently at 3.83%.
  • The blockchain market is expected to reach $19.9 billion by 2023.
  • About 59.6 million Americans currently own cryptocurrencies.

The bottom line

Cryptocurrency prices are fluctuating wildly, and many investors are trying to capitalize by timing their purchases while the prices are low. But this is uncharted territory, and no one knows how the cryptocurrency market is going to play out since there are so many players and no long-term trends to follow.

While it may be tempting to borrow money to try to “buy the dip,” it’s never a good idea to borrow money you may not be able to pay back.

Dr. Leonard Kostovetsky, assistant professor at Boston College’s Carroll School of Management, reaffirms this.

“It is an exceptionally risky and foolish idea to take out a loan to purchase cryptocurrency,” he says. “Anyone who has done this should immediately sell enough cryptocurrency to repay their loan in full, or risk having to default on that loan in the future.”

And Geoghegan says that if you’re still willing to commit to cryptocurrency, plan for a long and bumpy ride.

“The only way to improve your odds is to invest over a long time horizon,” he says. “Plan to wait at least five years to profit from your crypto investment.”

Advice from the professors

What’s the one piece of advice you’d give to anyone who has used a loan to purchase cryptocurrency and is worried right now about fluctuating prices?

Dr. George Athanassakos

Professor of Finance and the Ben Graham Chair in Value Investing at Ivey Business School, University of Western Ontario

“Investing in cryptocurrencies is like gambling. Will you borrow money to play in a casino? If you did, you are addicted and need to seek help.”

Dr. David L. Yermack

Albert Fingerhut Professor of Finance and Business Transformation at the Stern School of Business, New York University

“I have never invested in cryptocurrency myself due to the high risk, and I don’t recommend that others do so, either. Anyone with money currently invested in the crypto markets should probably close out their positions, regardless of what price they paid to purchase their investments or how they financed their purchases.”

What’s the most important piece of guidance you have to offer potential cryptocurrency investors?

Dr. Leonard Kostovetsky

Assistant Professor at the Carroll School of Management, Boston College

“I would NOT recommend putting significant savings in cryptocurrencies. They can be a small part (1%) of a person’s overall portfolio, and/or it can be fun to put a token amount of money to learn more about them or as a conversation starter. Otherwise, cryptocurrencies are extremely risky, and are more akin to lottery tickets than good investment assets such as bonds, stocks, or real estate.”

Dr. Mark Grabowski

Associate Professor, Communications, College of Arts and Sciences, Adelphi University

“Don’t overexpose yourself financially. Don’t take out loans or rack up credit card debt to buy cryptocurrency. Invest only what you can afford to lose. Don’t put all of your disposable money into cryptocurrency. Be sure to diversify and invest the majority of your money in safer, traditional investments. And if you find yourself stressing over cryptocurrency, get out of it or at least talk to a professional counselor – it’s not worth risking your mental health over.”

In the future, do you think cryptocurrency will overtake bills and coins as the primary global currency?

Dr. Bryan R. Routledge

Associate Professor of Finance, Tepper School of Business, Carnegie Mellon University

“Most of our transactions are already digital (credit card, debit card, apple watch, PayPal, Venmo … ). However, most of those payment systems are anchored in the established banking sector. Does Bitcoin and other crypto have a role to play? To date it seems not yet. However, there is (presumably) lots of innovation still to come in blockchain technology. For example, would it be fair to judge the internet based on Amazon’s 1994 website?”

Dr. Giovanni Compiani

Assistant Professor of Marketing, The University of Chicago Booth School of Business

“The promise of cryptocurrencies is ambiguous at this time. It may well be that crypto (or more generally blockchain-based technologies) are the way of the future, but there is also a chance that some of these innovations will lead nowhere. In light of this, my view is that potential investors should treat cryptos as essentially a gamble and thus that it is in general not advisable to borrow money in order to be able to invest in this market. Of course, this will depend on each individual investor’s risk tolerance, but for most people I would say the above advice should apply.”

Dr. Yermack: It’s extremely unlikely that decentralized crypto such as Bitcoin will ever play a central role in the global financial system. Rather, the blockchain and other technology introduced by crypto is likely to be coopted by the legacy banks and government institutions to make them more secure and productive.

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