Bitcoin Forum

Hi everyone

We are working on a solution aiming at offering lombard loans in fiat currency against bitcoins brought to an exchange as collateral.

Considered LTV: 40-50% of bitcoin value (USD 10'000$ worth of bitcoins would allow a loan of 4-5000$)

Considered Interest rate: 4-5% per annum

Exchange: Established Western exchange enabling to access and trade your collateralized bitcoins anytime. BTC Withdrawals won't be allowed during the course of the loan.

Loan: Proceeds can be used for crypto trades on the exchange or sent to any bank of your choice.

Based on these conditions, what percentage of your bitcoins could you potentially bring as collateral for a loan  ?

Thanks a lot for your feedback.

Cheers!

That would depend on how much money I think I need and how desperate I am for funding. But if you want me to give you a general answer then I wouldnt want to part with more than 30% of my BTC.

Thanks, please vote

I voted for "Over 50%" ,but i don`t understand one thing.
You say,"enabling to access and trade your collateralized coins..."
What if i trade and loose my collateralized coins and run away, without paying the lombard loan? ;D
If the bitcoins are used as collateral,it`s better to keep them in a wallet and don`t use them for trading.

You won't be able to withdraw BTC or proceeds coming from the sale of BTC. These are meant to cover your loan.

Also, the exchange would only authorize BTC trades if your trading margin allows it.

So there is no risk that you run away ! :)

Thanks for the vote!

At most I can part with 50% of my bitcoin stash. But this can change if I needed more money. Can you explain further this one?

The interest rate is good and not bad. That is actually a good deal and a win for the clients who would like to avail of your loan. But I just want to say that if you are really giving away loans and offering it to the public you must create some security protocol so as the one who made a loan will surely pay. There are many people on the net will apply for loan and they will submit necessary documents but after making the loan they will not pay and it is hard to locate them and make them face legal court since they are widespread all over the world.

Thanks for your input.
The loan would be credited on your cash account at the exchange upon receipt of the collateralized bitcoins.
You will be allowed to transfer the monies out or use them to trade on the exchange.

I think the 30-50% of bitcoin will be good become collateral because it is online service of loans business,
you are building high risk business although it is good innovations,
you have good ideas build this business, I agree with your interest rate because high risk must be high gain,
although it will be difficult for make this business. Good luck

Thanks for your remarks.
We are at an early stage of this project. We need to cover all operational & legal aspects before the launch.
Lombard loans is not that risky as a business, you just need to make it right.

So you get the fiat loan, but you put up Bitcoin as collateral? How do you work around the Bitcoin volatility? Today Bitcoin is worth $1200 and you

give a loan based on that, but tomorrow the price of Bitcoin falls to say $600. You have a lot of faith in this technology, by doing this. The other

side of the coin is this.... You loan at $1200 and the person cannot pay, and you make a massive profit.  ::)

For borrowers who get a loan for the first time I think about 30%-50% would be a sufficient collateral for you. Moreover, for reliable and honest borrowers after the third or fourth time they will ask for a loan, at your discretion, then the just smaller collateral about 15%-30% as a gift of good faith would be the more appropriate one.

Even with 50% margin on collateral value you guys may loss so much if price get dumped. It is understandable why you guys are happy to give loan only with 4-5% annual interest but there is no guarantee that bitcoin price will always go up, so you guys should have some kind of security for situation like that.

I barely take Luna's and when I do it's normally very little to get a few things around me done so I can just let you hold just a little up to 5% of my Bitcoin because it might not necessarily take loan for me to pay back.

Thanks for your remarks

The exchange would constantly measure the market value of collateralized bitcoins vs the size of the loan.

Borrower will be alerted to take action when the margin falls to 20%.
The platform will trigger automatic sales of the bitcoins when we reach 10%.

It will depend upon how much fiat i actually need and you are offering loans for very low annual interest which sound quite crazy.

There was many P2P bitcoin lending platform and all of them are failing completely and what actually lack in bitcoin lending is trust between two parties. Will there be some trusted escrow in middle, like the trading platform where you will have bitcoins from collateral will act as escrow provider?

It depends relatively on the amount of money I'd like to go in for but I'm a but stingy with my bitcoins do I would not like to risk more than 30% of my Bitcoin for a loan. NEVER!

If something sounds too complicated, its scam or some get rich-fast method but not for users only for creator.
Im sorry if im not right, this sounds like it.

Any honest business around bitcoin is good for bitcoin overall :) so good luck and hope ur intentions are correct.

Are you serious? You always be willing to part 50% of your BTC? Surely it must depend on how much you have and at what price BTC is in at that moment. Bitcoin itself is money, why would you want to loan your BTC for an inferior form of money?

It is definitely not a scam !

Some bitcoin holders need fiat cash for their cost of living or for trading purposes, but they don't want to sell their bitcoins.
This is why we want to offer them a chance to get a loan while keeping their bitcoins.

Again, the exchange is reputable and all legal aspects will be duly covered.

If you dont mind me asking, what do you intend to do with the BTC in your trust? Lock them for safe keeping? I suggest you use a third party escrow that is trusted by the community.

It is great to see that corporates are taking interest in bitcoin and they are planning to provide loans on bitcoin as a collateral. However, this loan may be a big failure because corporates are greedy. Why 40-50% as LTV??? It should be over 80% as bitcoin has a huge upside potential. It is very well possible that the bitcoin value will get doubled or tripled during the tenure of the loan. What's your strategy? Let's looks at a hypothetical scenario..

Collateral for loan: 1 BTC (valued at $1200 while taking loan)
Loan amount: $600
Loan tenure: 2 years

Now after 2 years, 1 bitcoin is valued at $3000
Loan is repaid and now it's time to release the Collateral amount. What the borrower will get? Will he get back one bitcoin which was the actual Collateral or will he get back the bitcoin worth $1200??

Can you please clarify??

Thats true. 40% - 50% is too low and who will be naive enough to risk their BTC not going back to the in case of a failed repayment of the loan. That would mean they got your BTC for half the price or less.

The simple answer for this situation will be they can sell off their coins when they need hard cash and with the price of bitcoin changing rapidly how do you trust taking them as a loan collateral and what is the percentage you are willing to loan ,normally when it comes to gold loan we would get almost 67% of the market valuation,how do you really calculate when it comes to bitcoin,the easiest way for me is to sell off my coins at the market rate and would buy at a later time.

Thats a good idea if the market is going down. But selling off your BTC and planning on buying back at a later time in a rising market makes you lose some value. It was better to do nothing and hold your BTC.

Thanks for your input. We planned to do cold storage with them as part of the exchange existing policies but we take it as a good advice.

Again, the value of the collateralized bitcoins will be constantly measured vs the size of the loan, so the loan can be upped if your bitcoins gain in value too.

Let me show you a concrete exemple:

- you deposit 10 bitcoins at a market price of 1000$ per BTC: total collateral value = 10'000$ allowing you to get a USD 5000$ loan
- some time later bitcoins are worth 2000$ per BTC: total collateral value = 20'000$ allowing you to get an extra USD 5000$ loan (loan size 10'000$)

You are free to pay back your loan anytime.