How to: Trading Bitcoin Loans for Profit

Bitcoin Loans on BTCJam

The Quest for the Ultimate Lending Platform Continues

 

The team at CryptoCrooks are now in the second month into the Bitcoin lending business. We’ve started modestly, maintaining just a small amount of bitcoin on the account to loan. Our strategy has emphasized diversifying away risk. Never would we focus all of our bitcoins on lending alone. Be that as it may we’ve allotted a decent part of our focus in maintaining and growing our bitcoin lending activities.

 

This is a screenshot of our repayment calendar.

BTCjam Bitcoin Loans

Loan Payment Schedule – A calendar for who pays, how much, and when.



Our  Strategy for Trading Bitcoin Loans on BTCJam

The main strategy has been to spread loans amongst several borrowers one bit at a time. No matter what dollar amount we’ve got in the account, our method of lending involves spreading the portfolio of the account amongst several different borrowers. This is to minimize the amount of loss our account would sustain were a single borrower to default on the loan.

We’ve also been selling notes on the loans we have active as a way to obtain our investment capital back sooner. Instead of holding the note to a preset maturity period, we list the note to be sold, not quite at the full amount but at a fair rate. Our method is to hold some of the bitcoin loans for a long time period, and resell others quickly. We’re diversifying the time horizon for holding loans as well.

Risks of loaning Bitcoins on BTCJam

The two major risks with using this platform:

  • potential for collapse of the platform (BTCJam) itself.
  • Default risk of each individual borrower you lend  bitcoins to is another risk factor.

 

In Practice

So we’ve been spreading out loans across multiple borrowers (around 10), selling many of these loans into notes, and then reinvesting them. We’ve only been at this for the past 2 months, however we feel as the learning curve is not too steep. We are quickly getting the hang of how to successfully execute on this P2P lending platform.

Criteria for Evaluating BTCJam Loans: What to Look For

I typically scan the profiles of potential people I want to invest with for a few key things. The main factor being actual amount of bitcoins the user in question has already repaid, and also how much they have outstanding in loans.. That’s the first thing my eyes screen for. Then I look for the usual other suspects, the interest rate being offered, the repayment length, comments by other users of the user borrowing bitcoin, their positive and negative feedbacks, how well written the description of the purpose of the funding is… things like that.I factor all these things in and decide if I’m comfortable with lending to this person or not. More to come.

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