[ANN] The first regulated Bitcoin Real Estate Investment Fund (REIT)

[BadBitcoin (James Sutton)]

My company "Smart Property Investments" (which is in the process of incorporation) is working on bringing legal, safe property investment to the bitcoin world.


I would love to receive any input (good or bad).

A link to our security is in my signature

[btceic]

The idea sounds interesting

[BadBitcoin (James Sutton)]

The idea sounds interesting

we're currently going through the legal hurdles to fully comply with local regulatory agencies, we should be completely ready for investors by august 

[btceic]

The idea sounds interesting

we're currently going through the legal hurdles to fully comply with local regulatory agencies, we should be completely ready for investors by august 

I posted a couple of questions on the description thread.

[BadBitcoin (James Sutton)]

The idea sounds interesting

we're currently going through the legal hurdles to fully comply with local regulatory agencies, we should be completely ready for investors by august 

I posted a couple of questions on the description thread.

replied sir, I'll be around for the next few hours answering questions 

[zhangxiongfei]

Is there any more detailed business plan?

[BadBitcoin (James Sutton)]

Is there any more detailed business plan?

it's being constructed currently with our law team, the listing will be completed in at most two weeks, we're trying to make sure that we don't say anything that is not a legal direction, as it could return and bite us down the road.

[btceic]

Thanks for all the feedback James, I am excited about this opportunity!

[BadBitcoin (James Sutton)]

Thanks for all the feedback James, I am excited about this opportunity!

no problem, your questions were all valid and it helps point where the communities interest lies and where we should focus on (other than the legal considerations of course)

[BadBitcoin (James Sutton)]

Just to update this page if you fellas aren't following my securities post

[btceic]

possibly relevant:
http://m.techcrunch.com/2013/07/17/realcrowd/?icid=tc__art&

[BadBitcoin (James Sutton)]

possibly relevant:
http://m.techcrunch.com/2013/07/17/realcrowd/?icid=tc__art&

interesting, a little different then our strategy, interesting design I like to enable the bitcoin economy more than just have a kickstarter

[DrGregMulhauser]

As you can imagine this allows for an unprecidented hedge against bitcoin volatility while still partipating in the bitcoin ecosystem

Actually, I'm a bit puzzled by this. On the face of it, investing Bitcoins into a security whose principal assets are not Bitcoin-demoninated amounts to taking an unhedged short position in Bitcoin relative to whatever the other asset happens to be. As a result, these investments incorporate unlimited risk with respect to appreciation in the value of Bitcoin as expressed in units of whatever the other non-Bitcoin asset happens to be.

For example, buying a fund which invests in gold is equivalent to taking a short position Bitcoin relative to gold and therefore incorporates unlimited risk with respect to appreciation in the value of Bitcoin as expressed in units of gold. You invest 1 Bitcoin and get 1 share of a security holding 1 unit of gold. Then the value of Bitcoin appreciates, so that you can buy twice as much gold with your Bitcoin. But oops, you're short Bitcoin, having sold your 1 Bitcoin in exchange for 1 share of a security holding 1 unit of gold. You decide you'd like your Bitcoin back, so you sell your 1 share of the security, but now you only get back .5 Bitcoins, because that's all the Bitcoins you can buy with 1 share of a security holding 1 unit of gold.

Likewise for a REIT, except replace gold with real estate.

I'm not saying the proposed project is a good, bad, or indifferent investment -- only that your statement that it "allows for an unprecidented [sic] hedge against bitcoin volatility" is puzzling at best. On the contrary, it seems like a paradigmatically unhedged position which is equivalent to selling your Bitcoins and buying an ordinary listed REIT on an ordinary regulated stock exchange. Unless, by "hedged", you mean "something which will decrease in value when the value of Bitcoin goes up versus the dollar"...?

[nomailing]

As you can imagine this allows for an unprecidented hedge against bitcoin volatility while still partipating in the bitcoin ecosystem

Actually, I'm a bit puzzled by this. On the face of it, investing Bitcoins into a security whose principal assets are not Bitcoin-demoninated amounts to taking an unhedged short position in Bitcoin relative to whatever the other asset happens to be. As a result, these investments incorporate unlimited risk with respect to appreciation in the value of Bitcoin as expressed in units of whatever the other non-Bitcoin asset happens to be.

For example, buying a fund which invests in gold is equivalent to taking a short position Bitcoin relative to gold and therefore incorporates unlimited risk with respect to appreciation in the value of Bitcoin as expressed in units of gold. You invest 1 Bitcoin and get 1 share of a security holding 1 unit of gold. Then the value of Bitcoin appreciates, so that you can buy twice as much gold with your Bitcoin. But oops, you're short Bitcoin, having sold your 1 Bitcoin in exchange for 1 share of a security holding 1 unit of gold. You decide you'd like your Bitcoin back, so you sell your 1 share of the security, but now you only get back .5 Bitcoins, because that's all the Bitcoins you can buy with 1 share of a security holding 1 unit of gold.

Likewise for a REIT, except replace gold with real estate.

I'm not saying the proposed project is a good, bad, or indifferent investment -- only that your statement that it "allows for an unprecidented [sic] hedge against bitcoin volatility" is puzzling at best. On the contrary, it seems like a paradigmatically unhedged position which is equivalent to selling your Bitcoins and buying an ordinary listed REIT on an ordinary regulated stock exchange. Unless, by "hedged", you mean "something which will decrease in value when the value of Bitcoin goes up versus the dollar"...?

But, don't you think, that it is much easier with this REIT to transfer your value in and out of the bitcoin currency? Therefore I would agree that it indeed is a very good hedge against bitcoin volatility.

At the moment a trader could try to sell bitcoins at a high USD price and buy them for a low USD price at exchanges to make a profit. This would keep the bitcoin volatility down. But not many traders would like to do that because they would have to go through exchanges. It would take several days until you move your bitcoins into some other investment fund. If it is possible to directly exchange between bitcoins and other financial instruments, then more people would actually use this way to make a profit. Therefore they would keep the bitcoin price stable.

The same applies to some companies, which might be trading in bitcoins with customers. They could easily temporarily move their bitcoin positions to this REIT and directly back to bitcoins without needing exchanges and without the need to go through USD. They would be safe against bitcoin price volatility.

[BadBitcoin (James Sutton)]

As you can imagine this allows for an unprecidented hedge against bitcoin volatility while still partipating in the bitcoin ecosystem

Actually, I'm a bit puzzled by this. On the face of it, investing Bitcoins into a security whose principal assets are not Bitcoin-demoninated amounts to taking an unhedged short position in Bitcoin relative to whatever the other asset happens to be. As a result, these investments incorporate unlimited risk with respect to appreciation in the value of Bitcoin as expressed in units of whatever the other non-Bitcoin asset happens to be.

For example, buying a fund which invests in gold is equivalent to taking a short position Bitcoin relative to gold and therefore incorporates unlimited risk with respect to appreciation in the value of Bitcoin as expressed in units of gold. You invest 1 Bitcoin and get 1 share of a security holding 1 unit of gold. Then the value of Bitcoin appreciates, so that you can buy twice as much gold with your Bitcoin. But oops, you're short Bitcoin, having sold your 1 Bitcoin in exchange for 1 share of a security holding 1 unit of gold. You decide you'd like your Bitcoin back, so you sell your 1 share of the security, but now you only get back .5 Bitcoins, because that's all the Bitcoins you can buy with 1 share of a security holding 1 unit of gold.

Likewise for a REIT, except replace gold with real estate.

I'm not saying the proposed project is a good, bad, or indifferent investment -- only that your statement that it "allows for an unprecidented [sic] hedge against bitcoin volatility" is puzzling at best. On the contrary, it seems like a paradigmatically unhedged position which is equivalent to selling your Bitcoins and buying an ordinary listed REIT on an ordinary regulated stock exchange. Unless, by "hedged", you mean "something which will decrease in value when the value of Bitcoin goes up versus the dollar"...?

But, don't you think, that it is much easier with this REIT to transfer your value in and out of the bitcoin currency? Therefore I would agree that it indeed is a very good hedge against bitcoin volatility.

At the moment a trader could try to sell bitcoins at a high USD price and buy them for a low USD price at exchanges to make a profit. This would keep the bitcoin volatility down. But not many traders would like to do that because they would have to go through exchanges. It would take several days until you move your bitcoins into some other investment fund. If it is possible to directly exchange between bitcoins and other financial instruments, then more people would actually use this way to make a profit. Therefore they would keep the bitcoin price stable.

The same applies to some companies, which might be trading in bitcoins with customers. They could easily temporarily move their bitcoin positions to this REIT and directly back to bitcoins without needing exchanges and without the need to go through USD. They would be safe against bitcoin price volatility.

exactly, not only that but there are very few non bitcoin investments that can actively produce reliable, safe income in the bitcoin world. You could exchange your bitcoins for fiat, then purchase property, however going directly from bitcoins to property skips an uncessary step, and doesn't expose you unecessarily to potentially volatile fiat valuation.

[DrGregMulhauser]

exactly, not only that but there are very few non bitcoin investments that can actively produce reliable, safe income in the bitcoin world. You could exchange your bitcoins for fiat, then purchase property, however going directly from bitcoins to property skips an uncessary step, and doesn't expose you unecessarily to potentially volatile fiat valuation.

OK... So, as I originally suggested, the investment itself does not represent any type of hedge whatsoever -- and, on the contrary, represents an entirely unhedged short position in Bitcoin, relative to the value of real estate. The 'hedge' that you're referring to is merely that you're eliminating currency risk for the duration of time it takes to convert Bitcoin to fiat and then conduct a purchase in fiat. This would be like me offering to sell you a bag of apples for .01 Bitcoins and telling you that buying my apples would be a great Bitcoin hedge, because although you could go and convert your Bitcoins to fiat to buy my apples, in fact I'm saving you that extra step and thereby enabling you to avoid exposure to potentially volatile fiat valuation.

You have said that there are very few non Bitcoin investments that can actively produce reliable, safe income in the Bitcoin world. Do you mean to say that this investment does do that? Setting aside the elephant in the room -- namely, the short position in Bitcoins relative to real estate -- do you mean to say that you will actually be generating Bitcoin income?

For that to happen, the investment would at the very least either need to be receiving rental income which was itself denominated in Bitcoins, or it would need to be entering into futures or forward contracts to protect dollar-based rental income from changes in the value of Bitcoin versus the dollar. Have you described how you'll be doing either of those things, and I've just missed it?

Can you point out to me where I'm going wrong in my understanding? As far as I can tell, what you're describing is asking people to give you Bitcoins so that you can change them to fiat and use that fiat to set up an entirely fiat-based property rental business. You'll be taking on an undisclosed level of additional fiat debt (as you described in your other thread on the topic) and (hopefully) generating a fiat-based income stream. In what way is this anything other than a purely non-Bitcoin soon-to-be-business tapping into the Bitcoin economy simply because it's there, Kenilworth-style?