Those Who Invest in Bitcoin with Debt Are in Danger: Crypto Winter is Coming

Difficult Weeks in the Cryptocurrency Market

Last week was filled with dizzying uncertainties for cryptocurrency investors. As the new week begins, hopes that Bitcoin would reach $200,000 by 2025 are quickly fading. According to analysis reports, the argument that cryptocurrencies provide protection against global economic uncertainties and rising inflation is losing its validity.

The Risks of Investing with Debt

Investors are entering the new week not only by holding their existing assets but also by choosing to borrow against these assets. Cryptocurrency platforms like Coinbase, Binance, and Ledn allow users to take out cash or stablecoin loans by using their crypto assets as collateral. These borrowing transactions are usually limited by loan-to-value (LTV) ratios ranging from 50% to 75%. For example, against $400,000 worth of Bitcoin collateral, $200,000 can be borrowed.

According to Galaxy Research, such loans reached a record level of $73.6 billion in November. However, under current market conditions, the risk of the collateralized assets losing value poses a serious threat to this borrowing strategy for investors.

Risky Strategies and Expert Warnings

According to MarketWatch, a 51-year-old investor who invested his retirement fund in Bitcoin and borrowed against this collateral is acting with the confidence provided by the limited supply and viewing price drops as buying opportunities. However, experts warn that a prolonged decline in Bitcoin could have devastating consequences for investors adopting such strategies.

The Impacts of the Crypto Winter

Analysts note that Bitcoin’s cycles of rise and fall are long-term, predicting that investors will face a challenging process. Matt Hougan describes the current situation not as a simple correction but as a full-fledged "crypto winter." It is mentioned that a process similar to the collapse of 2022 could occur, with excessive leverage and profit-taking deepening the current decline.