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Why Did Banks Ban Cryptocurrency Purchases Using their Credit cards?

The future role of cryptocurrencies in financial markets - Information AgeThe wave of banks that have banned the purchase of cryptocurrency using their credit cards grows as Wells Fargo is now on board with these type of bans discover brics chain
. A number of other banks, such as Chase, Bank of America, Citigroup and more, are also part of this new trend that is limiting the purchase of cryptos.

Debit cards, it seems, can still be used to purchase crypto (check with your bank to be sure of their policy), but the use of credit cards to purchase crypto has taken a turn with these banks leading the way with these purchasing bans, and it probably won’t be long before this ban becomes the standard.

Seemingly overnight purchases started being cancelled when credit cards were used to buy crypto, and people who never had any trouble before buying crypto with their credit cards began to notice that they weren’t being allowed to make these purchases anymore. Volatility in the cryptocurrency market is the culprit here, and banks don’t want people to spend a lot of money that will become a struggle to pay back if a major cryptocurrency downturn happens like it did at the beginning of the year.

Of course, these banks will also be missing out on the money to be made when people purchase cryptocurrency and the market has an upswing, but they have apparently decided that the bad outweighs the good when it comes to this gamble with their credit cards. This also protects the consumer as it limits their ability to get into financial trouble by using credit to buy something that could leave them cash and credit poor.

Most investors who used credit cards to make cryptocurrency purchases were probably looking for the short term gains, and had no plans to stay in for the long haul. They had hoped to get in and out quickly, then pay off the credit cards before the high interest kicked in. But with the constant volatility of the cryptocurrency market many who had bought, with this plan in mind, found themselves losing a tremendous amount of assets with the downturn of the market. Now they are paying interest on lost money, and that is never good. This, of course, was bad news for the banks, and it caused the current and growing trend of banning crypto purchases with credit cards.

The lesson here is that you should never max out a line of credit to invest in crypto, and only use a percentage of your hard assets to make crypto purchases. These funds should be funds that you can have locked up for the long haul without it hurting your budget.

So, don’t get caught putting money into cryptocurrency that you will be needing soon just to find that a downturn has taken money out of your pocket. There is an old saying that goes, “Don’t gamble with money you can’t afford to lose, ” and that is the lesson that banks want people to learn as they venture into this new investment frontier. This year we can observe that cryptocurrencies tend to move up and down even by 15% of value on a daily basis. Such changes of price are known as a volatility. But what if… this is totally normal and sudden changes are one of the characteristics of the cryptocurrencies allowing you to make a good profits?

First of all, the cryptocurrencies made it to the mainstream very recently, therefore all the news regarding them and rumors are “hot”. After each statement of government officials about possibly regulating or banning the cryptocurrency market we observe huge price movements.

Secondly the nature of cryptocurrencies is more like a “store of value” (like gold had been in the past) – many investors consider these as backup investment option to stocks, physical assets like gold and fiat (traditional) currencies. The speed of transfer has as well an influence upon volatility of the cryptocurrency. With the fastest ones, the transfer takes even just couple of seconds (up to a minute), what makes them excellent asset for short term trading, if currently there is no good trend on other types of assets.

What everyone should bear in mind – that speed goes as well for the lifespan trends on crypto currencies. While on regular markets trends might last months or even years – here it takes place within even days or hours.

This leads us to the next point – although we are speaking about a market worth hundreds of billions of US dollars, it is still very small amount in comparison with daily trading volume comparing to traditional currency market or stocks. Therefore a single investor making 100 million transaction on stock market will not cause huge price change, but on scale of crypto currency market this is a significant and noticeable transaction.

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