BTC Loans and Interest Rates

[LogicalUnit]

Hi, everyone! My little mining operation is getting started, and when I start generating Bitcoins, I need to know what I should do with them. According to coinlenders.com, I can get an interest rate of 25% APR on accounts with at least 1 BTC. Firstly, what does APR mean? Is it just "per annum"?

Secondly, why are interest rates so high? My Australian bank account pays 3.10% p.a. in comparison. How does inflation affect the BTC interest rate?

Basically, is it smart to put my BTC into one of these accounts?

[lch]

Yes its per annum.

I don't really know why interest rates are that high. But the logical conclusion is that there's a lot of profit to be made. You should not the the interest rate will vary unless you buy a COD.

I think its alright, provided that you have some spare BTC lying around.

[mhps]

Is the APR number risk-adjusted return of investment? If the one who borrows your BTC uses it to do risky business (e.g. speculation) then you could lose your money entirely if the borrower's business goes bankrupt due to losses.

[countryfree]

Basically, is it smart to put my BTC into one of these accounts?

I'd rather ask: "Is it safe?"

A bank doing business with fiat usually have a large building to convince people it will last. What are the credentials of this company?

[Aureum_Coffee]

Hi, everyone! My little mining operation is getting started, and when I start generating Bitcoins, I need to know what I should do with them. According to coinlenders.com, I can get an interest rate of 25% APR on accounts with at least 1 BTC. Firstly, what does APR mean? Is it just "per annum"?

Secondly, why are interest rates so high? My Australian bank account pays 3.10% p.a. in comparison. How does inflation affect the BTC interest rate?

Basically, is it smart to put my BTC into one of these accounts?

Put some money in one of these entities, only if you trust the person or the entity enough to handover your BTC on their verbal promise.  If the person or entity that promises high rate of return folds up shop and disappear overnight, you don't have any recourse.

The 25% interest rate reflects not only the high BTC volatility, and also high risk of may/ may not get your BTC back.  I am sure there are some good entities for you to park your BTCs.  Caveat Emptor.

[bb999]

Hi, everyone! My little mining operation is getting started, and when I start generating Bitcoins, I need to know what I should do with them. According to coinlenders.com, I can get an interest rate of 25% APR on accounts with at least 1 BTC. Firstly, what does APR mean? Is it just "per annum"?

Secondly, why are interest rates so high? My Australian bank account pays 3.10% p.a. in comparison. How does inflation affect the BTC interest rate?

Basically, is it smart to put my BTC into one of these accounts?

APR is annual percentage rate so a 6% loan for 3 months would be a 24% APR (4 increments of 3 months in a year times 6%)

The biggest risk (as has been stated already) is default risk.  There is no way to know the entire loan portfolio of the entity backing that website.  They may issue lots of loan at 25-30%/year that stay current for 3 months and then stop paying entirely.  It's easy to get people to commit to paying 25%/year, significantly less easy to collect on those loans. 

With no significant or recorded track record it has significant scam potential as well.  All the best to anyone who puts their money into this type of investment, let us know how it turns out.

[LogicalUnit]

Yeah, I dunno if I can trust this guy, who insures his own debts.

[Voodah]

Hi, everyone! My little mining operation is getting started, and when I start generating Bitcoins, I need to know what I should do with them. According to coinlenders.com, I can get an interest rate of 25% APR on accounts with at least 1 BTC. Firstly, what does APR mean? Is it just "per annum"?

Secondly, why are interest rates so high? My Australian bank account pays 3.10% p.a. in comparison. How does inflation affect the BTC interest rate?

Basically, is it smart to put my BTC into one of these accounts?

Put some money in one of these entities, only if you trust the person or the entity enough to handover your BTC on their verbal promise.  If the person or entity that promises high rate of return folds up shop and disappear overnight, you don't have any recourse.

The 25% interest rate reflects not only the high BTC volatility, and also high risk of may/ may not get your BTC back.  I am sure there are some good entities for you to park your BTCs.  Caveat Emptor.

What entities would you recommend to do this?

[kodo]

80% of BTC "Loans" are scams, I advise caution

[DPoS]

usury has no bounds and should be stricken to hell!!!

out you snake!! away from bitcoins!!!

 

[kodo]

Dont do this guys, its obviously a scam.

[Aureum_Coffee]

What entities would you recommend to do this?

I park some BTCs with ASICminer stock, at BTC-TC.  Only 15% of what I have, because of low risk appetite.  The 15% I invested there is considered experimental fund.  Won't hurt me too much if the stock went belly up and lose that 15%.  Upside is you get weekly dividends around 24% APR.

[freedomno1]

Its Fortress 
Besides 25% APR is reasonable with bitcoin he-he

[shawshankinmate37927]

Yeah, I dunno if I can trust this guy, who insures his own debts.

Most of the loans that TradeFortress makes are backed with collateral (virtual shares, other crypto-currencies, etc):

https://bitcointalk.org/index.php?topic=159359.msg2387792#msg2387792

If you take a look at his thread, you'll see that he has a lot of happy depositors.  Obviously, don't put all of your eggs in one basket.  Spread the risk around.  I have deposited some bitcoins with CoinLenders to earn daily interest payments and I've bought shares of ASICMiner to earn weekly dividend payments.  I'm happy with both, so far.

[shawshankinmate37927]

Secondly, why are interest rates so high? My Australian bank account pays 3.10% p.a. in comparison. How does inflation affect the BTC interest rate?

Because the supply of bitcoins available to be loaned out is relatively low and the demand to borrow them is relatively high compared to fiat.  (Or, put another way, lots of people want to borrow bitcoins, but few people want to lend bitcoins.)  Supply and demand determine prices.  An interest rate is just a way to express the price of borrowing (or renting) money.  If more people make deposits and fewer people take out loans, then the interest rates will drop.

[drawingthesun]

The thing is how much are loans from www.coinlenders.com? If the loans are only a few % higher than the interest to the depositors, then how will coinlenders survive people defaulting?

In its most simplest form a bank survives because the 7% mortgage income is way higher than the 3% paid to depositors and this spread makes enough money to cover defaults and loses, it would be interesting to find out what the lender - loaner spread on coinlenders is...

[silverserpent]

save your own BTC, buy more rigs; when too much buy silver n gold. you be your bank

[Aureum_Coffee]

save your own BTC, buy more rigs; when too much buy silver n gold. you be your bank

Now that's an idea.  Get some gold coins, go over to India, China, Indonesia, or wherever in Asia where gold is in high demand.

Profit $$$.

[DrGregMulhauser]

Because the supply of bitcoins available to be loaned out is relatively low and the demand to borrow them is relatively high compared to fiat.  (Or, put another way, lots of people want to borrow bitcoins, but few people want to lend bitcoins.)

I think it's interesting that within the confines of a single exchange (Bitfinex) -- where, notably, borrowed funds cannot be removed from the exchange -- the demand for dollars to buy Bitcoins on margin appears to be much higher than the demand for Bitcoins to short. The result is a perpetual asymmetry in prevailing interest rates, with USD interest rates extraordinarily high, BTC rates exceptionally low, and the ratio between the two growing or shrinking depending upon whether the USD/BTC exchange rate is rising or falling, respectively.

[Fugger]

In the fiat world you usually have a base interest rate and on top comes a compensation for risk. Then you should get something that's called an arbitrage free interest rate. Since there is no central bank in the Bitcoin world, we don't have a real reference as to what is the 'right' interest rate. A simple answer would be: the rate where supply and demand match. So when someone offers a particular interest rate, it is interesting to see whether they find enough lenders.