Lombard loans against Bitcoins

[pinkflower]

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.

[avikz]

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!

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??

[pinkflower]

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.

[eaLiTy]

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.

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.

[pinkflower]

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.

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.

[Calangaman]

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.

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.

[Calangaman]

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!

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??

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.