A Bitcoin mortgage is a dangerous option for investors looking for safe means of payments and transactions
Cryptocurrencies have moved to completely new territory when they witnessed widespread adoption among individual investors and even institutional investors. Major tech companies are now using cryptocurrency to evaluate their big expenses and conduct overseas payments and transactions with agility and transparency. But would you be ready to pay your mortgages using major volatile cryptocurrencies like Bitcoin? Well, you should think twice before taking such a drastic step. Several fintech companies are now allowing their customers to pay mortgages using Bitcoin and other cryptocurrencies. Eventually, crypto mortgages became quite popular, but experts believe that crypto, especially Bitcoin mortgages, are a bad idea in 2022. Among several fintech companies, Milo became the first to provide crypto mortgage facilities by enabling borrowers to leverage their Bitcoin holdings to buy real estate in the US. But the move raises several critical questions regarding the current stature of Bitcoin and other digital assets in distinct countries and its state of acceptance as a means of payment.
The cryptocurrency market is full of unnecessary risks. Due to its volatile nature, the price that you pay for something today might not be worth the same tomorrow, indicating that a Bitcoin mortgage today for US$2000 might easily become US$4000 tomorrow. Most businesses that accept crypto start with the most popular digital coins like Bitcoin, Ethereum, and others. But even though they are noteworthy in their performance in the market, extreme volatility will always be a part of it, which makes them quite ill-suited for payments and purchases. Generally, most investors wish to buy the property and real estate with Bitcoin, but time and again, experts are warning against this.
How does a Bitcoin mortgage work?
There are a few ways to make Bitcoin mortgages work, and each way is subject to the distinct laws and regulations that pertain to each country, and distinct policies that differ from lender to lender. Lenders who wish to use Bitcoin to pay mortgages must identify it as an asset. While applying for a mortgage, investors must list all of their properties, cash, and cash equivalent assets so that lenders can determine the quantified amount to borrow. Sometimes, lenders also refer to applications with Bitcoin deposits over to the financial crime unit to double-check if there are any signs of money laundering. They might also ask for a statement from the fund platform and a bank statement as evidence of the source of the assets.
Why is Bitcoin mortgage a bad idea this year?
Currently, Bitcoin is standing in a very vulnerable position. The crypto reached milestones last year in 2021, taking the entire crypto market to new highs. But it crashed shortly after its massive price rallies. Bitcoin mortgage is not a good idea right now because its massive volatility might cause enormous financial losses. Recently, in January 2022, Bitcoin steeped below US$40,000 causing a huge crash in the crypto market. It wiped over US$1 from the aggregate crypto market. There have definitely been other downturns for the crypto market and Bitcoin, but this incident marked the second-largest ever decline in the dollar for both.
Adopting a new currency that is not backed by any organization or government requires deep consideration and thoughts. It is okay to be in vogue, but it is even more crucial to follow trends that actually make sense. Investors who can afford the volatility of Bitcoin can invest in it and even use it to pay mortgages, but for those who are new in the market and are looking for safe and transparent means of payment, a Bitcoin mortgage might be a dangerous option right now.
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