John Carson, Author at Peer & Social Lending

Investing in My First P2P Bitcoin Loan On Bitbond Pt3

November 2, 2015 by John Carson Leave a Comment

Welcome to part three of my p2p bitcoin lending adventure. In this part I will update you on some of my previous investments as well as clue you in on how I spent this month’s €100.

Before we have a detailed look at my portfolio let’s re-cap on the investment strategy I am following. This should allow you to understand the motivation behind my investments more clearly, and might give you some ideas for your own investment strategy.

Important factors I consider:

Connected and credible eBay account
Small business loans
Clean repayment history
Diversification across currencies, loan terms, regions of the world, and loan amounts
Medium-to-high credit risk investment portfolio. Meaning B to E ratings.
Informative loan description
I do not invest in businesses I don’t understand

For a more detailed approach, please check out part 2.

I should add, that some of my investments might only fit a majority of these criteria and not all.

Now that the standards I set are clear, here is the list of loans I invested in this month:

Loan Listings	Investment (BTC/USD)
https://www.bitbond.com/listings/2MPGMW4T7M	0.1/33
https://www.bitbond.com/listings/2M045T4SBQ	0.02/6.60
https://www.bitbond.com/listings/2MDBH04SWD	0.02/6.60
https://www.bitbond.com/listings/2MRYED4TBT	0.02/6.60
https://www.bitbond.com/listings/2MSAT74TCX	0.05/16.60
https://www.bitbond.com/listings/2MRN204TB2	0.05/16.60
Total =	0.26/86.30

As you can see I have fallen a little short of the €100 this month. This is mainly because two loans I lent to were not fully funded, and my investments were returned back to me. I will keep looking for suitable alternative loan listings in the coming days to spend my remaining bitcoins.

My Portfolio So Far: Investing In My 10th Bitcoin Loan

With that under our belt, let’s have a look at my portfolio summary as of 2nd of November. (Click the image for a better view)

As you can see I have invested in 10 loans so far with an expected internal rate of return of 17.66% and 13.05% for my bitcoin and dollar denominated loans respectively. I am not sure what my actual IRR will be but I’m intrigued to see what it turns out as, especially after one or two almost inevitable defaults.

To shield myself from the potentially catastrophic effects of defaults, I have diversified as much as possible within my given parameters. Below you can see a screenshot of my investments, showing you my diversification (Click the image for a better view):

For my next round of investments, I will keep in mind to favour dollar denominated loans, as my portfolio is a little bitcoin heavy at the moment.

From the screenshot given above, you will also be able to see that a number of my loans have not been funded yet. This is because, as with most p2p lending platforms I am aware of, loan requests on Bitbond are active for a predetermined period, giving investors time to acknowledge and invest in them. In Bitbond’s case, the period is 14 days.

Due to the differing funding dates, the repayment schedule is a little difficult to follow. Below I have included a screenshot of the repayments history for my first funded loan. (Click the image for a better view)

Under the Outstanding Principal column you can see the value of the loan that was funded. In this case, the loan was 5 bitcoin (btc). At today’s prices, this converts to around $1670.

The Total Payment column indicates my investment in the loan. In this case it was 0.15 btc which was around €35 or $38 at the time of investment. Adding the Interest Payment to the Principal Payment gives us my total repayment which is 0.16 btc. By today’s prices, this would convert to €48 or $53 giving me 37% return on investment.

This highlights the great opportunities and risk associated with bitcoin investments. The earnings can potentially be huge, but the borrowers ability to repay may be compromised.

That being said, the risks of bitcoin denominated loans are clear from the outset and I trust borrowers to inform themselves prior to taking out a sizeable amount of money.

I am looking forward to seeing how my bitcoin denominated loans play out.

I will update again next month with a summary of my new investments. Please let me know in the comments below what you think of this series, and ask me any questions I might have failed to answer so far.

P2P Lending ~ The FED Anitdote

October 28, 2015 by John Carson Leave a Comment

Interest Rates Are Set To Be Zero Forever - Thankfully P2P Lending Provides a Good Rate of Return by Haven Investor.

At the end of last month, following the September 2015 Fed Committee meeting, Janet Yellen - the Fed Governor admitted to reporters that it is not impossible that the Fed might hold interest rates at zero forever within the USA, where they have been for the last 7 years since the emergency measures were put in place during the height of the financial crisis back in 2008. Japan has been living with zero interest rates since 1990 since their debt bubble popped over 25 years ago.

Meanwhile, the United Kingdom and European Union have also been living on zero interest rates since 2008 with no serious intention to raise them anytime soon. In fact, within the European continent the problem is even more serious with an ongoing battle against deflation taking place with countries such as Sweden now having negative interest rates imposed on their population, therefore the SAVER effectively take a LOSS EVERY YEAR with the bank by holding their money in their account.

The central banks of the world have decided to declare war on prudent savers for the benefit of the risk takers who get into too much debt they cannot hope to pay back. Luckily for savers, there is now a new and exciting alternative to a traditional savings account that can generate a high yielding, low risk source of income - that alternative is: Peer to Peer Lending.

What is Peer to Peer Lending? Peer to Peer (P2P) lending, in a nutshell, is individuals lending money to other individuals or businesses without a banking acting as an intermediary between the two parties. The majority of P2P lending is now done online on a marketplace platform where a borrower by providing their credit information can seek a loan from many anonymous investors.

On most platforms, an auction takes place and dependent on the borrowers details the investors bid to lend money at a particular interest rate, with the average final rate being set for the borrower. As the industry continues to grow, there are now many types of loans available for individuals, small to medium businesses, property developers and now even using the digital currency Bitcoin.

Benefits of Peer to Peer Lending for the Investors? The most important benefit is the good annualised rate of return, dependent of the level of risk - with a yield of 5% for the lowest risk to 15% for the higher risk customers. Compared to a typical bank account yield of less than 1%, peer to peer lending provides a viable alternative for growing your earned savings.

Also, it provides further diversification of your investment portfolio from traditional equities and bonds. Whilst at the same time, contributing to the growth of an economy by funding businesses or individuals.

How to Invest in Peer to Peer Lending? It depends on your country of residency and level of experience as an investor. If you are a first time investor in Peer to Peer Lending - we recommend starting with the largest and more established platforms first.

For investors based in the USA, we recommend Lending Club or Prosper. For investors based in the UK, we recommend Funding Circle, Zopa and Ratesetter. To access a global marketplace for wide selection of peer to peer lenders in every major country across the world, visit www.haveninvestor.com

Tips for Investing Successfully With Peer to Peer Lending

Once you found the right peer to peer lending platform for your level of risk and you are ready to invest - we recommend the following tips to increase your level of return whilst reducing your risk.

Spread your investment over as many loans & peer to peer platforms as possible – to limit the risk of defaults
Make sure you do your research – understand the processes, ensure you are comfortable with the risk
Reinvest your returns – avoid your returns sitting idle and not earning any interest
Optimise the automation tools within the peer to peer to invest & reinvest in loans automatically – to save time.

Written by Haven Investor. The Global Online Marketplace for Alternative Finance & Offshore Strategies

Investing In My First P2P Bitcoin Loan On Bitbond (Pt2)

October 12, 2015 by John Carson 4 Comments

Please note that this is not investment advice.

So, as announced last month, I will be trying out the peer to peer lending platform Bitbond and will be writing about my experiences on this blog. The positives, the negatives and the room for improvement will all be discussed here.

Initially I will only invest €100 (฿0.454 as of October 12th 2015) in handpicked p2p bitcoin loans, following up with another €100 every month. This will allow me to build up a respectably diversified portfolio, but still gives me the time I need to learn from my mistakes. I will tell you my investment strategy later on so you can follow developments and hopefully learn from the mistakes I make, as well as pitch in with your own investment strategy in the comments. All the great interest rates and dreadful defaults will be recorded on this blog.

Buying Bitcoin For My First P2P Bitcoin Loan

So let’s get started. Before we can invest, we need to get our hands on some of the digital currency. The ease of doing this depends on your location, although it is relatively simple to do anywhere in the world. I am currently based in Europe and luckily they (Bitbond) just rolled out their newest feature; allowing users with EU bank accounts to buy bitcoin on Bitbond itself, without the need to register with an exchange.

I’ve included screenshots of my progress all along this post, so you can get a feel for Bitbond and see if p2p bitcoin investments might interest you. Below is the welcome page of the Bit4Coin integration which allows you to buy bitcoin on Bitbond if you are in Europe (including the UK).

The process is pretty self-explanatory, I just had to type in the usual basic information about my personal and bank information. It’s worth touching on the second step, which is the identity verification part, as it actually doesn’t involve the uploading of any scanned documentation or such like.

Instead it is a live video session with an english speaking security assistant who asked me to hold up my ID and input a tan number he sent to my phone. Interesting stuff.

If you are not located in Europe (and I know a lot of you are in the US, Australia, New Zealand etc), you will need to find an exchange or marketplace that services your region.

Below, I briefly outline the best way for you to get bitcoin quickly. I am by no means an expert here, but Bitbond have a guide, which helped me get an overview for the non-european readers.

For most of you, Coinbase seems like the best option for acquiring your first bitcoin. I signed in and purchased some, in order to go through the experience, and can highly recommend them. The signup process is pretty simple, and the navigation afterwards is easy. If you have difficulties with signing up, check out the support documentation for detailed help.

If Coinbase is not an option for you, have a look at Local Bitcoins. They service most areas in the world and tend to offer decent pricing from what I have read. I have not used the platform personally however, so let me know what you think in the comments below.

Once you have bitcoins on your Coinbase or Local Bitcoins wallet, simply transfer them to your Bitbond account by scanning in your QR code, or entering your Bitbond wallet address in manually.

Right, now that the basic stuff is out of the way, let’s get investing.

What is my investment strategy on Bitbond?

So first off, I think it’s really important to have an investment strategy. Blindly following my gut feeling has never worked for me, both on p2p lending platforms and in real life. Setting clear investment parameters obviously depends on the information available to you.

In Bitbond’s case, the amount of data is quite impressive. Going to their statistics page, we can download a CSV file containing their entire p2p bitcoin loan history. Importing this into Google Sheets, we can manipulate the Data and see which investment strategy would have worked best in the past, giving us insights into what will work in the future.

Below you can see a screenshot of the CSV file. (I have made it a Media File, so you can click on it and see it in its original size, in case it’s too small for you at present)

Some columns have been cut out for size and visibility reasons but here is a list of all the factors included in the CSV which will be available to us:

Loan Identifier
Nominal Interest
Term
Purpose
Project Description
Borrower Identifier
Borrower Rating
Employment
Region
Facebook
Twitter
PayPal
eBay
LinkedIn
Publishing Date
Funding Date
Status
Amount Requested
Amount Funded

Despite the long list there is some important information missing in my opinion, such as the name, an image and a relevant email address, so I can contact the borrower before commiting any bitcoins. I understand that giving out email addresses can be a thorny matter so I don’t hold that against them. However, the name in particular, is usually an important factor in my p2p investments because I like to be able to do some background checks of my own on prospective investments. This would usually include, checking Facebook Groups for scam alerts related to this name, doing a google search and seeing what comes up, as well as checking them out on LinkedIn, to see their professional credentials for myself.

Further, an image helps me, because over the years I have become better than most in identifying stock or stolen photos. Overly attractive people smiling into the camera, or low baseball caps and sunglasses tend to be reliable red flags in my opinion.

Using Data to Devise An Investment Strategy On Bitbond

Nevertheless, with this Data we can start to sculpt our ideal portfolio from scratch. In order to do so, we need to write out our motivations behind investing in the first place. For me, I would like to make high returns while investing in small business owners from around the world. Thus, I will be looking for borrowers who have connected their eBay account, and have indicated “Working Capital” as the purpose of their p2p bitcoin loan.

Borrowers with a Credit Rating ranging from B to E will be considered in order to insure high yields, despite the probably higher default rate. The loan and payment history also play important roles in my strategy, as borrowers with overdue loans are regarded as untrustworthy and will be ignored.

Other factors I will be scrutinising include the Loan Description and the Industry in which the borrower is active. If I have little-to-no knowledge about the industry, or the Loan Description is sloppy or too short, I will not invest. Preferably, borrowers will already have repaid a loan on Bitbond, but I am flexible on this point.

With the cornerstones of my lending strategy in place, I will insure diversity in most other factors across my investments. The location, interest rates, the denomination of the loan, employment, size and period of the loan, the number of twitter followers or Facebook friends a prospective borrower has, should vary across my investments in order to ensure maximum possible diversity in my portfolio. This is important, because sudden macroeconomic effects for example, can radically change an entire regions repayment rate. Thus, I protect myself by diversifying as much as possible around my basic investment principles.

Now that we have our strategy in place, we can have a look at the p2p bitocin loan listings to start finding the best borrowers. The first borrower I checked out seemed a good fit already.

As you can see from the screenshot, this listing falls in line very nicely with my investment principles, so I decided to place a bid of BTC0.15 or €32.72.

To place a bid, all you have to do is press the orange button and enter a value of your choice. Be sure to have bitcoin exchange rate site open so you know exactly how much money you are investing in bitcoins.

Once I had placed my first bid, I sifted through a large number of other listings until I had found three more, bringing my total to four, for now. Below I have linked to their listings pages, so you can check them out and understand what’s happening

https://www.bitbond.com/listings/2KAPFH4RGF invested = BTC0.15
https://www.bitbond.com/listings/2K0SAW4R1Z invested = BTC0.15
https://www.bitbond.com/listings/2KCEN64RJJ invested = BTC0.05
https://www.bitbond.com/listings/2JM63P4QDZ invested = BTC0.1

I picked these borrowers because they fit my investment strategy, I like their loan descriptions, and I believe their credentials. Their credit ratings vary, the highest being a B, and the lowest a D, as do their locations and social media connections. This is perfect for my goal of diversifying as much as possible, and hopefully reaping handsome rewards for it in the process.

Finally, having a look at my “Investments” section, I can see my activity laid out in visual form, which is pretty sweet.

Below the graphs, the repayment schedule is located which provides all the essential information in one go.

What happens to my p2p bitcoin investments?

Now that my first p2p bitcoin loan has been made we have to wait and see if the borrowers I lent to get enough funding to get paid out. This requires a minimum 60% of the request to be funded on the date of expiration. Every loan request is available for investment on Bitbond for 14 days, with mine having between 2 and 12 days remaining on their loan requests at time of writing (12/10/2015).

That being said, should one of my investments not get the funding they need to receive the loan, the money I lent will be returned to me and I will reinvest it on the platform. This will be accompanied with a post on this blog of course to keep you up to date.

That’s it for today. Let me know what you think of this series and Bitbond in the comments below. Any tips are hugely appreciated.

Bitbond Review: My Bitcoin Lending Test

September 3, 2015 by John Carson 7 Comments

Bitbond Company Demo

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%.

Source: https://www.lendingclub.com/info/statistics-performance.action

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).

Conclusion

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.

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