[FULFILLED!] 10,000 BTC loan - LONG TERM

[yochdog]

I have been thinking about this a fairly long time, and think the time is right to put the proposal out there.  


10,000 11,000 BTC 5 year note:

-Minimum single commitment of 100 BTC (not interested in 1000 different lenders)
-Interest of 10% per annum
-Re-payment will be in 20 60 equal, quarterly monthly payments
-P & I will be amortized over the lifetime of the loan.
-Lender(s) must establish up front if they wish to be repaid in BTC or USD



Let me try to head off some obvious inquiries....

Q:  What in the world do you need 10,000 BTC for?
A:  I am in the process of buying out the senior partner in my firm (several percent a year), thus need capital.

Q:  Why not go to a bank?
A:  This is 1000% more interesting.  Really, the implications (if this works) are really profound.  It would mean individuals are able to crowd-source large amounts of financing without playing the rigged game with banks.  I have no problem securing bank financing, but I hate the system, just like most Bitcoiners.  

Q:  How can the lender(s) be assured of willingness, and ability to repay?  
A:  Couple reasons:  My record as a trader/borrower is pristine.  The equity in the firm yields substantially more than the interest rate on the loan, so I am locking in a spread.  Further, I will fully collateralize the loan.

Q:  What if BTC spikes and you have not the funds to buy sufficient BTC to repay those who chose to be repaid in BTC?
A:  Great question.  Fortunately, I own the vast majority of Bitcorp Mining CO (totally different venture).  My share yields several hundred BTC per month.  This, combined with my other substantial means, gives me very high confidence in being able to secure the necessary BTC.    

Q:  Why would someone loan you BTC at 10%, when people are offering crazy annualized rates on smaller loans?
A:  Most of the other loans I see are extreme short term in nature.  Its great if you can keep rolling over the loans to achieve the crazy annual rate, but you most likely cannot (this also increases the risk of fraud/scam as you deal with dozens of borrowers).  I feel that the rate I am offering, though lower than the norm, is a good deal for persons looking to invest BTC for a long time horizon with minimal ongoing hassle.  

Q:  Sounds interesting, but I really need more info to feel comfortable with this.
A:  I am willing to discuss more details with serious potential lenders.  


Just a final word.....I realize this will come off as crazy to many people.  I also know from past experience that it will attract some trolls.  That being said, try to be civil.  I am completely serious about this, and would love to see it work.  I think it would be great for BTC as a whole, and show tantalizing potential for future possibilities.

Constructive feedback is desired, and I am happy to answer any questions.  Let's do this!  

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[moocow1452]

Do we have any architecture for doing a Kickstarter-esque experience, or are we just tossing coins at addresses for the time being.

[memvola]

Q:  What if BTC spikes and you have not the funds to buy sufficient BTC to repay those who chose to be repaid in BTC?
A:  Great question.  Fortunately, I own the vast majority of Bitcorp Mining CO (totally different venture).  My share yields several hundred BTC per month.  This, combined with my other substantial means, gives me very high confidence in being able to secure the necessary BTC.

My primary concern is the interval. Five years is like an aeon in Bitcoin terms. Will Bitcoin Mining CO survive this year? Will you stay interested in acquiring BTC to reduce risk? Will Bitcoin itself survive, or will the exchange rate be above 1000$? It seems to me that there needs to be a backup plan covering all cases.

Also, maybe some details about who you are and what you do might help.

[yochdog]

Do we have any architecture for doing a Kickstarter-esque experience, or are we just tossing coins at addresses for the time being.

No formal architecture that I am aware of.  I would like to think we can put together something more substantial than just tossing coins! 

I absolutely plan on being completely transparent on the details of the loan, and post a spreadsheet showing amounts owed, amounts repaid, and any other info that the lenders desire to be shared. 

[yochdog]

Q:  What if BTC spikes and you have not the funds to buy sufficient BTC to repay those who chose to be repaid in BTC?
A:  Great question.  Fortunately, I own the vast majority of Bitcorp Mining CO (totally different venture).  My share yields several hundred BTC per month.  This, combined with my other substantial means, gives me very high confidence in being able to secure the necessary BTC.

My primary concern is the interval. Five years is like an aeon in Bitcoin terms. Will Bitcoin Mining CO survive this year? Will you stay interested in acquiring BTC to reduce risk? Will Bitcoin itself survive, or will the exchange rate be above 1000$? It seems to me that there needs to be a backup plan covering all cases.

Also, maybe some details about who you are and what you do might help.

That was certainly the largest hurdle I anticipated as well.  

Bitcorp is completely debt free, has assets in excess of $10,000, and needs only very low prices of BTC to remain highly profitable.  As for the other contingencies, I do not think I would be willing to do more than 40-50% of the loan with BTC repayment to largely reduce the exchange rate risk.  

Details on myself and what I do will gladly be shared privately with qualified, interested lenders.  

Thanks for the feedback, I know there are things I have not thought of yet.  

[PatrickHarnett]

Interesting (and thread noted).  Certainly no commitments today, but it is only 10,000 coin.  Allowing for a longer dated lower rate of interest once things settle down, shorter term is still much more expensive, and 12 months will net high yield, but I am not doing that yet.  Six month bonds may yet still pay reasonable rates and I'm considering those for late April.  Thus, initial reaction is way too low on the interest rate - interesting does not equate to simple profit.

Mr Serious (those that know will understand)

[finway]

10k is a lot, i want to see how this going.

[Matthew N. Wright]

And people thought I was crazy asking for 2,000.  

[jarsumarsu]

I can see one possible [risky] way how to do it;
If somebody buys 10,000 coins from mtgox (USD 50,000-60,000), then lend coins for you and pray for you...
I'm not that guy, sorry

I think miners [like me] do not want to spend 10,000 mined coins... [if someone has left so many ]

Interesting indeed, watching

[PatrickHarnett]

Interesting (and thread noted).  Certainly no commitments today, but it is only 10,000 coin

"Only" 10000 coins ?

Are you being facetious ?

Not completely.  But concentrating it into one spot like that is not the typical credit risk of this forum.

(As disclosure, I have a small, short-term loan from znort because it was easier doing that than moving a few thousand $$ into coins this week.)

[vampire]

The problem is that 10% is very low for a such loan. I have 7.5-7.8% bonds that are much safer investment than you.

But also:

I predict that BTC will price will grow and lending a large quantity of BTC requires much higher interest. And converting USD to BTC will incur a fee that with 10% isn't acceptable.
I haven't see what are you planning to do with these money (with details, monthly for the next 3 years). Shakaru comes to mind, you must prove that you wont end up like him.
Are you able to secure this loan with any physical property? Will you agree to a credit check?


Plenty of other issues...

[likuidxd]

The problem is that 10% is very low for a such loan. I have 7.5-7.8% bonds that are much safer investment than you.

Where did you get these bonds! I need to buy some...

[DeathAndTaxes]

The problem is that 10% is very low for a such loan. I have 7.5-7.8% bonds that are much safer investment than you.

Where did you get these bonds! I need to buy some...

Any brokerage in the world?

[vampire]

The problem is that 10% is very low for a such loan. I have 7.5-7.8% bonds that are much safer investment than you.

Where did you get these bonds! I need to buy some...

Pick any high yield bond etf, check holdings:

http://finance.yahoo.com/q/hl?s=JNK+Holdings

Hca 6.5%   N/A   1.48
Sprint Nextel 144A 9%   N/A   1.47
First Data 12.625%   N/A   1.45
Harrahs Oper 10%   N/A   1.18
Engy Future Inter Hldg Co Ll 10%   N/A   1.09
Cit Grp 7%   N/A   1.07
Dish Dbs 6.75%   N/A   1.02
Ally Finl 8.3%   N/A   1.02
Clear Channel Ww Hldgs 9.25%   N/A   1.01
Calpine 7.5%   N/A   1.00




First Data pays 12.6%.... But with ETF that you can sell at any point of time and  you get 7.4%, also there are triple tax free bonds for NYC.

[yochdog]

Hey all,

First off, I really appreciate you all taking the time to give feedback, offer advice, and ask questions.  There is an amazing amount of collective knowledge/ideas on this forum and it is great to be able to access it. 

I will try and respond to all of the posts one by one....just wanted to get a thanks out there first. 

[yochdog]

Two concerns: First, I'm very long (years) on BTC, and I believe we
are going to see a major (x10 at least) price increase in the next five years.

I have seen people borrowing large amounts in a currency that was different
than the one they earned their salary in and get literally *ruined* ... I am
really concerned with you actual ability to repay a loan over that long a period.

You address this in your Q&A, but I am truly not convinced by your answer.
Riddle me this: do you think you could survive a x10 price hike halfway down
the loan (2.5 years from now) ?

Second concern: The rate you'd like to borrow at is really not competitive as
compared to the current market rate on these forums ... I doubt you'll find many
lenders at this point, the opportunity cost gap is way too large. Again, addressed
in your Q&A, and again, answer is not convincing: yes, the super short term loan
business is a lot of work, but the annualized rates make both the work and the risk
worth a go.

But ... again, very interesting idea, following with interest.

Hey Znort.....you make good points.  Let me see if I can give some suitable answers. 

In regards to the currency risk, and whether I could withstand a x10 price hike:  Let's assume 4,000 BTC of the loan is to be repaid in BTC.  The quarterly payments would be approximately 250 BTC.  My shares in Bitcorp yield several hundred BTC a month(900 per quarter) currently, which gives me over 300%+ coverage on BTC debt payments.  Now, lets assume with a x10 price increase, the difficulty spikes as well.  Even if the difficulty goes to 4,000,000...I will still have 100+% coverage.  Finally, I would be willing to post a reserve account, maybe comprising 2 quarterly payments to be held by a trusted 3rd party, that would be used in the event of any shortfall on my behalf.

On the rate being offered:  This is clearly a stumbling point.  To simply cut to the chase, 10% is about all I can offer and still make the numbers work on my end.  At the end of the day, I want this loan in order to finance a better yielding asset.  If I give away the entire profit margin just to engage in a cool academic excercise, the economic motive disappears.  I can get 5.5% at my bank, but am willing to pay the additional 4.5% in order to help broaden the possibilities for Bitcoin.  Any higher than that, and I start to squeeze the net interest margin too much. 

Does that help?   

[yochdog]

Interesting (and thread noted).  Certainly no commitments today, but it is only 10,000 coin.  Allowing for a longer dated lower rate of interest once things settle down, shorter term is still much more expensive, and 12 months will net high yield, but I am not doing that yet.  Six month bonds may yet still pay reasonable rates and I'm considering those for late April.  Thus, initial reaction is way too low on the interest rate - interesting does not equate to simple profit.

Mr Serious (those that know will understand)

Hi Patrick,

I knew the interest rate was going to be a tough sell, but I am hoping that lenders will balance the relatively low rate against the sheer coolness of extending the Bitcoin economy into realworld finance.  Like I told Znort....at the end of the day I still have to make a spread on this deal, and 10% is pushing where I can do that comfortably.  As most of us know, interest rates in the traditional finance world are much, much lower than what we see on the forums.....trying to bridge that gap is going to be a challenge, but I am hoping this can be the first deal to do so!

[yochdog]

And people thought I was crazy asking for 2,000.  

I saw your thread, Matthew, and that was actually what spurred me to do this.  I think 2-3 years from now, we will look back on the "huge" loans that are being attempted today, and think "how quaint!".  The pace of change and maturing nature of the bitcoin economy is pretty awesome. 

[DeathAndTaxes]

If you can get 5.5% from your bank then you should however part of the reason you can get 5.5% from your bank is
a) proof of identity
b) proof of assets
c) proof of credit

Maybe 10% is viable, hell maybe even 7% is viable.

Still 10% on an anonymous no information provided just hope for the best loan vs 5.5% bank has a signed contract, legal rights, and verified debtor isn't exactly apples to apples.

The question is how much information are you willing to provide to reduce the risk to creditors and thus the risk premium in the interest rate?  If it is nothing then 10% is a joke.  Just because it is double your banks rate isn't really relevant.  2x the return on a 100x the risk isn't good business.

[yochdog]

The problem is that 10% is very low for a such loan. I have 7.5-7.8% bonds that are much safer investment than you.

But also:

I predict that BTC will price will grow and lending a large quantity of BTC requires much higher interest. And converting USD to BTC will incur a fee that with 10% isn't acceptable.
I haven't see what are you planning to do with these money (with details, monthly for the next 3 years). Shakaru comes to mind, you must prove that you wont end up like him.
Are you able to secure this loan with any physical property? Will you agree to a credit check?


Plenty of other issues...

Hey Vampire,

It seems that there is a very healthy split on where BTC prices are headed, so this is just one more way for the differing factions to place their bets.  

Where is the money going?  It will be used to purchase additional equity in the financial firm I work for, the cash flow from which will be used to pay back the loan.  I also have the 23 GH/s mining operation that produces sizeable BTC.  

I can secure the loan with physical property, the details of which would be worked out between myself and the lenders.  I am thinking it could be my brokerage account, the title to my brand new truck, or even the GPU's that power the 23 GH/s.  

I would provide a credit report to properly vetter lenders.  

Thanks!