Survive the Bear Market: Lend BTC

[heiditravels]

Although I am a fan of holding Bitcoin, a particular game plan has reliably paid off in the long term, I’m well aware that many people are hurting in this bear market.
Those who are very desperate to see any kind of gains during this down trend may be open to learning about how to lend out Bitcoin in return for interest payments.
There are a couple different ways you can lend your Bitcoin you hold and receive passive income in the form of interest paid by the receiving party.

VIEW VIDEO HERE

We’ve got platforms that bring together small/medium businesses who need loans and lenders. Platforms like these include:

• Bitbond
• BTCPop
  You can investigate who you are loaning to and choose how much and for how long you will provide the loan.

Here are some things to consider if you want to take part in these types of lending platforms:

• Pay attention as a lender if you have the ability to choose the base currency. so if you lend in USD and Bitcoin goes up, you'll receive less BTC but the USD amount will be the same
• Borrowers will need to disclose their personal information and will often need to verify it with social media accounts and or live video chats.
• Interest rates are decided based on the riskiness of the loan, if you want to earn more money through higher interest rates you’ll have to come to terms with the fact that the loan associated with it is very risky and very well may never be repaid.
• If your loan is unpaid by the borrower you can be provided information suitable for pursuing legal action. Or you can sell it to a debt collection agency. Neither of which are guaranteed to getting your money back.

There is another way you can also lend your bitcoin to traders and that is by using exchanges like Bitfinex and Poloniex.
Here, you can lend your bitcoin or other cryptocurrencies like Ethereum to traders who will use your coins to perform the stress inducing act of margin trading.

Margin trading is when traders borrow funds to make trades. When they do it right, they make exponentially more money than they would have been able to with their own funds, but if the trade goes south, the traders will find themselves owing exponentially more money than they are capable of repaying.

In the case of lending bitcoin on an exchange, the interest rates are determined by the market, those wanting to borrow will choose the least expensive interest rates.
Also, you are relying on the exchange to margin call these traders if their trades have become far too risky and have reached the threshold set in place by the exchange. It’s been said that you can expect to be paid anywhere from 3%-10% interest annually by lending on Poloniex, but this I’m sure is subject to change and is in no way a guarantee that you’ll have that same kind of payout.

Keep in mind that if you use either of these lending options you are placing your trust in the borrowers and in the platforms to pay back your loan. Not to mention the fact that you will be unable to trade the coins you’ve lent out. So if the markets start swinging heavily in the red or the green again, you’ll have to be patient to regain access to your bitcoin before you can do anything with it yourself.

If despite these warnings you’re willing to lend out your coins in order to earn some interest, I’ve included links to a lot of helpful information down below.

Reviews of Lending Sites
Both lending sites and exchanges
Information on Bitbond
Lending BTC for Margin Traders
Basic tutorial on how to lend BTC on Poloniex

Comments

[realestatecoach]

I use to do this w poloniex and enjoyed the idea of making btc while holding it.

[brokernaples]

Interesting options. But like you wrote, it is pretty risky. I rather hold.
I know there are way better times just ahead of us

[tobixen]

I've lost some 80 bitcoins on lending. Beware.

[heiditravels]

Wow I'm sorry to hear this. Do you mind sharing more about your experience so others can learn as well?

[tobixen]

I've written a couple of posts on my experiences ... though, here is some of the reasons:

• Giving a loan denominated in crypto currency is a very bad idea due to the volatility. Price dumps, and the lender is at loss, price explodes, and the borrower can't repay, making a loss for the lender as well.
• If the loan is for someone to realize some business plan, there is a significant risk that the business plan will fail, and the person will not be able to repay the loan
• Some people borrow for other purposes - living an unsustainable lifestyle, gambling, etc, those people will most likely never be able or willing to repay.
• Legal collection is hard enough domestically, internationally it's very difficult due to different rules etc.
• There are lots and lots of scammers out there. ID-checks are often worthless as the professional scammers are experts at faking ID-checks - other scammers don't even mind to hide their identity.
• Quite some lending sites have tried with different forms of reputation schemes. Reputation schemes where one can score reputation points by taking a loan and repaying it is bound to fail.
  • Some scammers are deliberately doing different kinds of "ponzi-style-borrowing", or paying high interests on loans just as a way to do a "reputation investment", increasing the amount they eventually will be able to run away with.
  • Even for the most trustworthy persons there is a significant risk that they eventually won't be able to repay their debt. A person may be taking significant business risks and be lucky for some few years, managing to pay a pretty decent interest rate on the loans taken - but then one year the business fails and the borrower goes bankrupt.
• The banks actually do a pretty decent job on calculating risks and giving loans - that's their primary business. Crowd-funding may have some competitive edges, but one should think three times before giving a loan - why doesn't the borrower rather go to the bank? Often the reason is one out of two - the bank is considering the risk as too high, or the borrower is just a scammer, planning to run away with the money borrowed.
• With a high risk and high default rate, it's needed with relatively high interest rates to defend the losses - but high interest rates do scare away the good borrowers. There are three kind of persons who don't mind paying a hefty 50% APR on a loan:
  • A scammer with no intention to repay the full loan amount don't need to worry about a high interest rate
  • A person who is bad at counting and economics will probably not be afraid of a high interest rate - but it's very risky to borrow money to such a person.
  • Some risk-takers may be able to turn over money with several percent profit weekly, a 100% APR loan may be a good deal for both parts. Perhaps the profits came from drug dealing, they will probably not be able to repay the debt after they get arrested. Other people may be able to create fantastic returns on the money invested through sheer luck - all until one day they are very unlucky and lose everything (like Einar Aas).

Also, I'm horrible at collecting debt - going around with a baseball bat and visiting people, that's not really my favorite hobby.

[martinmcfly]

[agrostis]

Thanks for giving a detailed list on why it can be dangerous to lend cryptocurrency.

[chessmonster]

Yes, indeed. I used Bitbond and I'd say 80% of the loans I participated in defaulted. Their collection efforts produced absolutely zero funds. I hope they're enjoying my money.

[metama]

what great content. Such knowledge. wow

[billykeed]

Interesting! Good post.

[headspace21]

i was on bitbond for about a year . How they decide there ratings is based not other credit history or credit score .

[martinmcfly]

It is very interesting what you show us here, it is an alternative that I had not studied, and that I have not heard from anyone else either. But what about the moral hazard?

Maybe I'll take a look, but more with the intention of receiving a loan, mainly because I do not have much. lol

[heiditravels]

Definitely do your research from a skeptical perspective. Nothing is a magical fix and there will almost always be hard lessons to learn. Make sure you take the time to educate yourself before making any decisions.

[freecrypto]

Now the whales have to long their bitcoin because their shortening strength is near to end. The maximum that btc can go down is upto 3,00$ not below that. Before the launch of the bakkt we can see btc upto 12,000$ also

[spozone]

As always another great posting full of value and information. Personally I use the bear time for maintenance, fine tuning and adjustments to my mining rigs. If I take a machine down for a day I don't have to feel panic that I'm losing money. Also I think it's a great time to look in to buying GPU's as the price tends to fall or sales occur during downtrends. There too I look at these dips as a great time to stock up on coin so when the bulls return you'll be smiling and patting yourself on the back.
Blessings to you. Keep up the good work...

[foxkoit]

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I want give also soon some loans... but I mast wait for the next year and see what the prices will do.
And the coolest is that I get to be my own bank. It's crazy to think that there's a very small few people out there who can only give loans and no one else has this permission.
But my bones inside me they some how say that this old banking is dying, and it's gets tragic end.

---

[worldtraveller32]

Very true on the risk of loan out cryptocurrency. Probably too soon in the game for this to be a regular thing in the crypto space. Then again it's all about how much risk one wants to take. Good Information and thanks for sharing. Sincerely JR

[sanees]

Bad time to invest, This is not a bear market. This is a question of credibility and sorting out where crypto goes. I have written a steem it article about this. Reality is lot of startups is investing block chain technology adoption but without the "value" game of crypto. This is the core reason. Hopefully a very successful product arises either in consumer space or business space that supports the "value" trading (steem like or storj like) , then we have a shot at this, otherwise crypto coins are going to "0"