Please note that this article should not be considered as investment advice.
Q1 and Q2 of 2015 have been respectable for p2p investors. Prosper reported crossing $4 billion in total loans issued, and an average ROI of 6.87% for loans originated by September 2014. Lending Club announced successfully breaking through $1.9 billion in originations in Q2, while providing the average investor with an ROI of 6-8%.
Ryan Lichtenwald, of Lend Academy and this blog, has been reporting healthy returns on Lending Club and Prosper of around 10%. Peter Renton of Lend Academy fame, reported an overall p2p lending return of 11.30% in Q2, while Simon Cunningham of Lending Memo has managed a massive 13.3% ROI on the two p2p lending giants.
As you can see from the graph above, Simon, Peter and Ryan represent the 90th percentile. The rest of us can expect significantly less from our investments on p2p lending sites.
So the question arises: Is there a p2p lending site out there that can bring 13% APR to the average investor and significantly more to the experts?
That is when I stumbled across Stu Lustman’s p2plendingexpert blog. Stu has been investing in p2p bitcoin lending platforms since March 2013, and is an expert in his field. Through him I have learnt that bitcoin investors have 3 main advantages over their established counterparts:
- the ability to diversify investments globally
- access to higher interest rates
- lower or no service fees
Below, I have pasted in a screenshot of Stu’s earnings report for May, which shows his monthly ROI’s across all investment hubs.
As you can see, the monthly ROI on his bitcoin loans are significantly higher than on his Prosper and Lending Club investments.
Armed with this fresh piece of information I began to do some research into p2p bitcoin lending and tried to identify the key players. The three biggest p2p bitcoin lending sites are Bitbond, BTCJam and BitlendingClub.
Why I’m writing this Bitbond review
I did a little digging to find out which platform offered the best service, and decided to go with Bitbond, after I noticed they had been featured in Lend Academy. They specialise in bitcoin loans for small businesses. This is a p2p lending sector that is growing fast and one that I find particularly attractive. Other bitcoin lending platforms focus on payday and personal loans which tend to have higher default rates and which are more risky.
In order to find out more about the sector and Bitbond specifically, I decided to write this first Bitbond review.
A loan listing on Bitbond
Since the borrowers on Bitbond are primarily small ecommerce businesses, their borrowers are entrepreneurs who have connected several social media and eCommerce accounts.
I particularly like that I can check out the eBay shops of borrowers, as I tend to trust large amounts of positive customer feedback more than the number of friends on facebook, or Twitter followers a borrower might have. At the same time this is information that you can not find on any of the conventional p2p lending platforms as far as I know.
In the screenshot shown above, you can see that this borrower from Kentucky, has 2315 positive reviews on eBay. For me, that is a signal that this person represents a good investment. It also instilled some confidence in me that I could find reputable borrowers on Bitbond, and would get my investment back, together with an attractive +10% ROI.
So what do you need to know about Bitbond
The first thing you notice when you sign up for Bitbond is the slick and easy to navigate interface. All the information you need is presented in a clean, easily digestible way. Below, I have included a screenshot of their loan listings page.
Here you can see the amount requested by the borrower, the country of residence, the interest rates, the credit rating, the terms and denomination of the loans.
This last point is worth explaining in a little more detail here. The denomination of the request determines the base currency of the loan. If the loan is denominated in dollars (green dollar sign in the CCY column) all values are calculated in USD. Thus, if the price of bitcoin should fluctuate, the repayment value and the returns investors make will remain unaffected.
The top three loan listings are coloured beige, and I have no idea why. The terms of the loan can range from 6 weeks to 5 years.
Coupled with higher interest rates commanded by borrowers from around the world, this provides some pretty attractive prospective returns for me as an investor, but more on that later in this Bitbond review.
Another feature I found helpful was the ability of investors and borrowers to communicate via the comments section of the loan listings pages.
This feature allows you to gauge your prospective investment before lending him/her your bitcoin. For me, getting to know the people I invest in is a crucial part of my investment strategy.
Availability of downloadable historical data
Another reason I decided to write this Bitbond review, was the availability of their historical loan data. This is an option that many of us know and value from platforms like LendingClub and Prosper. Bitbond is the only bitcoin lending platform that offers the same kind of data transparency as what we are used to from the traditional platforms. I could download this for free and easily as a CSV file on their statistics page.
Access to the data is important because it allows me and other investors to create a winning investment strategy. The public availability of this data also suggests to me that they know their business model is working.
Since the company is only 2 years old, the data is not yet as extensive as with the p2p lending giants, but it is enough for a start. With this information in hand, I could start to create a coherent investment strategy. I am a young, single man, so have relatively little to lose and therefore invest quite aggressively.
This is how you get started with bitcoin lending
Besides signing up, the only thing you need to get started is to buy some bitcoin. There are multiple platforms where you can do this. One that I find super easy to use is Coinbase. Once you have purchased your first bitcoins, you can send them to Bitbond.
The deposit gets credited in roughly 30 minutes which highlights one of the many advantages of bitcoin as a payment network. Transactions are quick and at the same incur negligible fees. That’s all you need to do and you’re ready to make your first investment in a bitcoin loan.
Getting to know the borrowers
The first thing I did after registering (took less than 2 minutes) was check out the borrowers I might be interested in. I particularly liked the layout of the individual loan listings pages. Below I have provided a screenshot of one of them.
Here I can check the accounts the borrower has connected, where he is located, the size of his salary, and what the purpose of the loan is.
In this case, the borrower is a man from Quebec who earns a significant wage, has impressive eBay seller feedback and a solid loan history. Thus, I decided to invest. Not much at first of course, but just a little bit to test the waters.
Here’s a short video explaining how to invest in a Bitbond loan:
Diversification and the AutoInvest tool
As with all investments, diversification is key in p2p bitcoin lending. What is different about Bitbond in this regard however, is the size of the bids investors are allowed to make: as little as 0.01BTC, or around $2 US dollars at today’s price. This allows me to diversify massively, across people, continents, and credit ratings, thus minimising risk.
This brings me on to the AutoInvest tool, which I am excited about but haven’t had the chance to use yet. I found this pretty intriguing video of their CEO Radoslav Albrecht explaining it:
Where Bitbond needs to improve
Besides the still shallow historical loan data, the number of key performance indicators available is the second weak spot worth mentioning here. Compared to Lending Club and Prosper, Bitbond does not provide a significant number of KPI’s, and has no graphic or visual display of any of its data.
That being said, the CSV file available for public consumption, definitely benefitted me and helped me create my (hopefully) winning investment strategy (more on that at the end of month).
Bitbond offers a high yield alternative to p2p lending sites. As Stu has shown in his monthly reports, bitcoin loans have the potential to outstrip the ROI of p2p loans. As investors, we should focus on the ROI as the key KPI to keep in mind.
This is by no means a call to abandon Lending Club and Prosper. They have shown that they can produce healthy returns on our investments. However, in 2015 bitcoin lending should be part of any healthy portfolio which aims to diversify and minimise risk.
Thus, the 13% average APR advertised by Bitbond should be considered attractive. The sleek interface and good user experience, coupled with the ability of small and large investors to yield high rewards, make Bitbond and p2p bitcoin lending an attractive proposition.
Finally, I should add that this Bitbond review was just a start. I will be writing monthly updates on my returns on Bitbond, giving you an insight into my p2p bitcoin lending experiment.
Thanks for reading.