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Money & Investing: Peer-to-Peer Lending

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  Jonathan Garneau February 24, 2015 at 12:19 pm

  I was wondering if anyone had any experience with p2p lending with bitcoins?

  I can see there seems to be a bunch of cryptocurrency p2p lending sites. Does anybody have any experience with them?

  I’ve already mined some bitcoins and was thinking it might be interesting to capture a yield on them.

  Alternatively, I was thinking if the p2p bitcoin is crap and it’s too risky not to get paid back, to take the other side of the trade: borrow (maybe to buy some more mining equipment) and then default on the loan…

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  Rick Rule February 24, 2015 at 12:32 pm

  your alternative consideration s fraud

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  Jonathan Garneau February 24, 2015 at 1:27 pm

  Indeed that is true, so I’m at least guilty of thoughtcrime for thinking about it…

  My hunch is that the sites which have high default rates will also have prohibitive rates, and vice versa.

  I found a bit more information:
  http://www.p2p-banking.com/countries/germany-bitcoin-p2p-lending-%E2%80%93-a-primer-in-8-steps/
  ‘the average nominal interest rate on Bitbond is 18.5% p.a. The effective return after defaults is approximately 7% p.a. with a default rate of around 12%.’

  It also appears to be possible to provide the margin (as a discount stockbroker would) to traders on bitfinex
  http://p2plendingexpert.com/why-i-lend-on-bitfinex/
  the daily rates he mentions (bid-ask 0.029% – 0.059%) correspond to about 11% to 22% when compounded annually.
  Bitfinex should close losing trades (margin call?) so there is less risk there, but there still remains the risk that the exchange itself closes (as others have done in the past).

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    Rick Rule February 24, 2015 at 3:23 pm

    I suspect that the nominal yield also relates to the volatility of the purchasing power of bitcoin relative to the value of goods and services purchased by would be lenders. As an investor, converting fiat currency to bitcoin and lending bitcoin would involve arbitrage calculations that would be rendered nearly impossible by the fluctuations in bitcoin pricing versus more conventional mediums of exchange.  Compliant US taxpayers ( I’m a coward, I am one) also face increasingly complicated tax consequences, which I suspect would be a nightmare, generating nominal bitcoin returns, and reporting the ” profit” in US$ when the nominal value of the bitcoin changed from the period of the loan origination to the time of maturation, and likely for each of the interest payments

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  Jonathan Garneau February 25, 2015 at 10:24 am

  Indeed, trying to capture USD yield via bitcoins is an arduous undertaking to say the least. I’m in Canada, so you’d have to add USD/CAD to that calculation, in addition to a less competitive bid/ask spread for BTC/CAD compared to BTC/USD.

  I’m looking at it more from a speculative angle. Bitcoin is a speculation, but I’d still like to hold some, just in case they take off (again). Ideally I’d like to get paid while I wait.

  I suppose the best analogy is holding dividend-paying gold miners (without really looking at their balance sheets).

  I do hold about 10x more gold miners and physical presious metals than bitcoins.

  The way I see it bitcoins and gold only have any value because of their rarity (which is inversely proportionnal to the capital invested in their respective mining infrastructures), but are pretty much useless appart from that. Gold has this cool property that you can hold it in your hand and looks kind of pretty. Bitcoin has this cool property that you can teleport it to anyone in the world for pennies on the dollar (or satoshis on the bitcoin…)

  I feel this is the first time in history where there is a somewhat credible alternative to precious metals as money. So if (or when) the big reset comes, I want to hold some bitcoins on the off chance that the market chooses that as the new money instead (or in addition to) precious metals.

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  Rick Rule February 25, 2015 at 10:32 am

  You are unique in your willingness to think about nominal yield denominated in the speculative asset, and untied to the currency you spend. In your case, the speculation makes absolute ” top line” sense.

  Now you need to learn how to become a lender, it s easy to put the money put, and me difficult to retrieve it!

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  Renaud Gagne February 25, 2015 at 11:12 am

  I’m waiting for BitUSD/bitSilver/bitGold lending capability to be release this year. I’m a little too risk adverse(volatility) to do it with bitcoin.

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  Samuli Pahalahti March 1, 2016 at 12:41 pm

  In Poloniex you can lend your bitcoins to traders. It seems to be quite reliable platform.

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  D. A. Price March 3, 2016 at 3:52 pm

  I have recently speculated on “micro-loans” with a few platforms and the results vary. If you can calculate risk and determine the validity of information that may or may not be complete or accurate, and refine your expectations, it’s no different than anything else. The difficulty lies with the fact that there is no consistency in borrower. When you look into the books of a business like a mine, or a public company that develops fake hearts, you have the ability to determine risk very easily. When someone in Turkey wants to open an grocery store, or someone wants to consolidate credit, their credit score isn’t relevant even if it’s good…or they would utilize that. Who knows for sure? Who can say what is best? I can’t offer advice, but I have dabbled with a few options and it’s growth, but slow growth, and I would argue, honest.

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