The latest research from the U.S. Treasury Department shows that an increasing number of low-income households are using cryptocurrency investment profits to pay for mortgage down payments, and their debt levels are gradually expanding. The report indicates that while the current default rate on these loans remains low, such high-leverage loans could pose risks if the economic environment deteriorates. (Background: MicroStrategy increases its stake by $5.4 billion to purchase 55,000 BTC: Bitcoin at $97,000 is not expensive!) (Context: Arthur Hayes: Stay rational during the bull market and cash out at the right time, Bitcoin could reach $250,000 by the end of next year) In November, under the leading cryptocurrency bull market driven by Bitcoin, many investors in the crypto space are seeing their spring through spot holdings and contract leverage to gain high returns. However, recent research from the U.S. Treasury indicates that among low-income households, the proportion of those involved in cryptocurrency investments is higher, and their applications and outstanding amounts for mortgage and auto loans have seen significant increases. It seems they are engaging in higher-leverage financial allocations after making investment profits, which raises a slight concern for the author. High-risk areas in cryptocurrency show a significant increase in debt levels According to a research report released yesterday (26th) by economists from the U.S. Treasury's Office of Financial Research, the report states that more low-income households are using cryptocurrency investment profits to pay for mortgages. They may be using proceeds from the sale of cryptocurrencies to make larger down payments to secure higher mortgage amounts. While it is certainly good if they can maintain high returns, if they incur large losses due to FOMO (fear of missing out), larger mortgage amounts may expose these low-income households to greater financial risks. Additionally, the research shows that in high-exposure areas of cryptocurrency, the proportion of low-income households with mortgages has increased by over 250%, and the average mortgage balance (outstanding amount) has soared from $172,000 in 2020 to $443,000 in 2024, an increase of 150%. Note: The study used tax data to determine which areas have higher exposure to crypto assets, defining a 'high crypto exposure' area as a postal region where at least 6% of households reported cryptocurrency-related taxes: The postal areas with the highest levels of cryptocurrency exposure also saw the largest increases in mortgage and auto loan applications and outstanding amounts in the following years. Potential risks brought by high leverage Data analysis indicates that the 'mortgage-to-income ratio' in these high-exposure cryptocurrency areas is significantly higher than recommended levels, suggesting potential risks to their financial stability. Researchers stated: High exposure to cryptocurrencies may lead to changes in financial behavior, further triggering financial instability. The mortgage-to-income ratio (MTI) is an important indicator of a household's or individual's mortgage affordability, defined as: Mortgage-to-Income Ratio = Monthly Mortgage Payment ÷ Monthly Total Income × 100%. It is generally considered that the mortgage-to-income ratio should be kept below 28%. Although the current default rate in these areas remains low, the research warns that high leverage may pose risks if the economic environment deteriorates. Therefore, it is essential to closely monitor the rising trends in debt balances and leverage ratios of such households in the future: If the financial difficulties of this group continue to worsen, they may trigger financial pressure in the future, especially when such high-leverage, high-risk consumers' exposure is concentrated in systemically important institutions. Of course, we are not saying that individuals investing in cryptocurrencies are at higher risk, but it is a fact that debt levels in these areas are increasing. If the cryptocurrency market crashes, it could indeed exacerbate instability in the financial markets. Related Reports Who is selling as Bitcoin drops to $90,800? Glassnode: $76,000 to $88,000 is a critical short-term retracement level Bitcoin's drop to $90,800 marks the largest decline since Trump's election! Analysts: The market leverage is too heavy, but it still constitutes a healthy correction A Brazilian congressman proposed to include 'Bitcoin in national reserves': Plans to invest $17.7 billion to stockpile BTC "The proportion of low-income households in the U.S. 'relying on cryptocurrency trading to take out loans for home purchases' has greatly increased, the Treasury warns: it could become a trigger for a financial crisis" This article was first published in BlockTempo (the most influential blockchain news media).

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