He wants the weekly 1%+ interest rates, but isn't currently interested in investing in BTC.

Is a CFD the best option for him to do this? (example)

I suggested that he:

1. Buy some BTC.

2. Short BTC in the same amount via a CFD (I can be the Long partner).

3. Invest BTC in some interest bearing account.

Assuming we both trust each other, this seems optimal.

My email to him:

Quote

So, the suggestion is that:

1. We sign a CFD contract for X BTC

2. You buy X Bitcoins

3. You invest X BTC with whichever "investment house" you want.

Now, Y months have passed, and your BTC have done 1%+ weekly (assuming interest rates haven't changed ... the investment house might change its interest in the future). You should not be effected at all by movements in the BTC-USD rate.

3 examples:

1.

If you buy 1000 BTC at 8 USD, and invest them in a 1% interest per week account, not compounding. Suppose you withdraw your interest every week and sell it.

Then 12 weeks later BTC is worth $12 each.

You withdraw your investment, and get 1000 BTC. You owe me 1000*(1-8/12) = 333 BTC. After paying me, you have 666 BTC = 8,000$, which is exactly what you put in, and you keep all the profits from interest payments. (You can keep these profits as BTC, or sell them, as you wish).

2.

Let's say you buy 1000 BTC at 8 USD, and invest them in the same 1% per week account, this time with compounding interest. You don't withdraw your interest each week.

12 weeks pass, and BTC is now $6.

You withdraw your investment + interest = 1126 BTC.

I pay you 1000*(8/6 -1) = 333 BTC, you now have 1459 BTC.

If you sell it all now, you get $8754. This is a little less than $8000 +12%, because this time you chose to compound your interest payments, and thus were a bit more exposed to the BTC-USD rate.

3.

The same, but this time the investment house defaults on you and vanishes with your money.

In this case, we still need to settle for the CFD. Note that because you are shorting BTC, you can remain owing quite a bit of money in this scenario.

For example, if you invest $10,000, and BTC-USD triples in this time (it's not a far-fetched scenario), and then the investment house defaults, you'll owe me $20,000, on top of losing your own $10,000 investment.

1. We sign a CFD contract for X BTC

2. You buy X Bitcoins

3. You invest X BTC with whichever "investment house" you want.

Now, Y months have passed, and your BTC have done 1%+ weekly (assuming interest rates haven't changed ... the investment house might change its interest in the future). You should not be effected at all by movements in the BTC-USD rate.

3 examples:

1.

If you buy 1000 BTC at 8 USD, and invest them in a 1% interest per week account, not compounding. Suppose you withdraw your interest every week and sell it.

Then 12 weeks later BTC is worth $12 each.

You withdraw your investment, and get 1000 BTC. You owe me 1000*(1-8/12) = 333 BTC. After paying me, you have 666 BTC = 8,000$, which is exactly what you put in, and you keep all the profits from interest payments. (You can keep these profits as BTC, or sell them, as you wish).

2.

Let's say you buy 1000 BTC at 8 USD, and invest them in the same 1% per week account, this time with compounding interest. You don't withdraw your interest each week.

12 weeks pass, and BTC is now $6.

You withdraw your investment + interest = 1126 BTC.

I pay you 1000*(8/6 -1) = 333 BTC, you now have 1459 BTC.

If you sell it all now, you get $8754. This is a little less than $8000 +12%, because this time you chose to compound your interest payments, and thus were a bit more exposed to the BTC-USD rate.

3.

The same, but this time the investment house defaults on you and vanishes with your money.

In this case, we still need to settle for the CFD. Note that because you are shorting BTC, you can remain owing quite a bit of money in this scenario.

For example, if you invest $10,000, and BTC-USD triples in this time (it's not a far-fetched scenario), and then the investment house defaults, you'll owe me $20,000, on top of losing your own $10,000 investment.