USD$ loans collateralized by BTC ???

[siggy]

Are there any sites/banks that will take BTC as collateral for USD loans?   (I'm thinking something like maybe Prosper, but accepting collateral?)

Basically, I've got a significant amount of BTC, but am wanting USD in the short term.  With the way the exchange rate has been going, I'm loathe to sell BTC at the risk of having to buy it back at a 50% premium 3 months from now.   I'd much rather just use it as collateral for a USD loan ( at a non-loan-shark interest rate ) and pay back the USD.

Siggy

[Scott J]

You could try to arrange something on here.

If you have some BTC held in escrow with a trusted member, it might not be that hard getting someone to lend you USD.

[Eisenhower34]

and the problem for any lender would be how to cover this in case the BTC price drops and siggy refuse to give back the money...

Ever heard about options? Sell your BTC and buy for a small fee an option to buy your BTC back at a fix exchange rate. Thats how you typical solve the above described problem.

[siggy]

Ever heard about options? Sell your BTC and buy for a small fee an option to buy your BTC back at a fix exchange rate. Thats how you typical solve the above described problem.

Excelent solution..  now where can I trade in options for BTC?    Just checked MTGOX & Bitfinex .. both a no-go for options...

Siggy

[siggy]

and the problem for any lender would be how to cover this in case the BTC price drops and siggy refuse to give back the money...

and this is just sooo true... it does however present a unique business oportunity for someone with excess FIAT laying around...

1) Make Fiat loans at reasonable interest rate (say 1% origination fee + 10% per year interest)
2) require initial 125% BTC collateral to open loan
3) if at any time BTC value falls below 100% remaining FIAT loan value, liquidate BTC to pay off loan.

As a lender, you are pretty much set on the risk front.. you get paid back either way... and 10% is way more than you'll get from any other guaranteed investment like a CD....

As a borrower, you are also in a win-win ..  if BTC goes up, you have a loan at a reasonable interest rate and you eventually get all your BTC back.  If BTC goes down, you still have the loan proceeds, and you got liquidated at a break-even point.

Doing this as a one-off wouldn't be reasonable, as the lender would have to constantly monitor BTC value vs Loan balance..  However if one were to build out an automated process to do this.. I can see where it would be quite nifty.

Soo.. who's gonna do it?

Siggy

[Eisenhower34]

1% quite uninteresting for all the trouble and problems.

You constantly have to monitor the BTC price. Check for the low regular interest payments not to mention that 125% are qute low. Check out the price drop Mar 23rd: high $69.5 low $52.3 so the price droped from 125% down to 92% withing 1 day so the sell would have been executed!

[siggy]

1% quite uninteresting for all the trouble and problems.

You constantly have to monitor the BTC price. Check for the low regular interest payments not to mention that 125% are qute low. Check out the price drop Mar 23rd: high $69.5 low $52.3 so the price droped from 125% down to 92% withing 1 day so the sell would have been executed!

Completely agree..which is why I said doing it as a one-off wouldn't be reasonable.  You'd need to build out a completely automated process to do it.  You'd want to do a real-time feed of the BTC/USD price and be constantly checking to see if any loans need to be liquidated. 

also.. good point on the 3/23 price drop.. you'd prolly want to up the initial margin requirements to something between 150 & 200%.  Maybe even liquidate at 105% (returning any overage to the borrower)

As to 1% being quite uninteresting.. I said 1% origination and 10% annual interest..  we've all been in BTC_land to long..  a 10% guaranteed return would be close to mana from heaven for most people out there.

Siggy

[JusticeForYou]

Are there any sites/banks that will take BTC as collateral for USD loans?   (I'm thinking something like maybe Prosper, but accepting collateral?)

Basically, I've got a significant amount of BTC, but am wanting USD in the short term.  With the way the exchange rate has been going, I'm loathe to sell BTC at the risk of having to buy it back at a 50% premium 3 months from now.   I'd much rather just use it as collateral for a USD loan ( at a non-loan-shark interest rate ) and pay back the USD.

Siggy

Hmm... This would probably work like a pawn shop transaction. You give the BTC to them, they give 30% of its value, but you still own the BTC. You must then make payments, if you miss a payment by 30 days or so, the BTC is then theirs to be liquidated.

Of course, you must trust them more than they trust you to repay.

100 BTC > $7000 * 30% > $2100 loan + 10% APR Amortized for the duration of the loan.

It could work. Not sure why you would do it tho... Unless you're leveraging with the USD Loan to buy more BTC... You'd have to hope for a 10% rise at least. Doable (lol).

But if there is a fall, you're in some trouble for the 'pawn shop' could sustain a 70% fall and still make money.

I responded here, because of the 'pawn shop' idea. I thought it be interesting to have a Casa Coin 1 oz. Gold Bitcoin 'pawned' at the Pawn Stars. I'm wondering if they'd add value to the gold because of the Bitcoin. If even a few bucks, it'd be good advertising.

[superbit]

Are there any sites/banks that will take BTC as collateral for USD loans?   (I'm thinking something like maybe Prosper, but accepting collateral?)

Basically, I've got a significant amount of BTC, but am wanting USD in the short term.  With the way the exchange rate has been going, I'm loathe to sell BTC at the risk of having to buy it back at a 50% premium 3 months from now.   I'd much rather just use it as collateral for a USD loan ( at a non-loan-shark interest rate ) and pay back the USD.

Siggy

Hmm... This would probably work like a pawn shop transaction. You give the BTC to them, they give 30% of its value, but you still own the BTC. You must then make payments, if you miss a payment by 30 days or so, the BTC is then theirs to be liquidated.

Of course, you must trust them more than they trust you to repay.

100 BTC > $7000 * 30% > $2100 loan + 10% APR Amortized for the duration of the loan.

It could work. Not sure why you would do it tho... Unless you're leveraging with the USD Loan to buy more BTC... You'd have to hope for a 10% rise at least. Doable (lol).

But if there is a fall, you're in some trouble for the 'pawn shop' could sustain a 70% fall and still make money.

I responded here, because of the 'pawn shop' idea. I thought it be interesting to have a Casa Coin 1 oz. Gold Bitcoin 'pawned' at the Pawn Stars. I'm wondering if they'd add value to the gold because of the Bitcoin. If even a few bucks, it'd be good advertising.

You could do it for a variety of reason not just leverage.  Maybe you had a DR bill come up unexpectedly and you get paid at the end of the month.  Or maybe you have a credit card balance but you think that BTC will grow faster then that rate so you take out a 10% fiat loan secured with BTC to pay off the loan.

To the OP: I am willing to lend you the FIAT, but my asking rate would be that you put up 150% BTC for the loan amount. It can go to escrow such as John.  The rate would be 1% up front and 14.9% per annum, calculated daily, and you pay the escrow fees.  Maybe not the best deal but PM me if interested, I'm likely in a different country and have exchange fees and such that would need to be passed on as well.

Certainly would be a great idea to have it automated into a site.  Would have to be something automated, and 10% a year is a tiny bit light I would think.