[ANN BTCJam] - Loans denominated in other currencies (USD/EUR/RU) - page 2.

boonies4u

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Quote from: Smoovious on February 21, 2013, 02:22:35 AM

At this point, I sure wish I was able to index my loan in USD instead of BTC... since BTC has more than doubled in price since I took it out. Sad

-- Smoov

Agreed. Though having it pegged at USD at this point wouldn't be very attractive either... Tongue

Smoovious

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Scattering my bits around the net since 1980

At this point, I sure wish I was able to index my loan in USD instead of BTC... since BTC has more than doubled in price since I took it out. Sad

-- Smoov

boonies4u

hero member

Activity: 826

Merit: 1000

Quote from: miTgiB on February 19, 2013, 04:55:43 PM

Quote from: Tulkas on February 19, 2013, 04:46:07 PM

Quote from: miTgiB on February 19, 2013, 02:51:56 PM

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose. You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

Please, read the OP again.

If you borrow 10 bitcoins today, to pay next month, you will theoretically pay aprox. USD $300.

Now suppose that in 10 days the bitcoin price jumps to USD$ 1000.00 per bitcoin, you still need to pay 10 bitcoins back, but now you will need USD$ 10,000.00 to buy 10 bitcoins!

But why value does it add? I agree you used the wrong word calling it a hedge, but other than informational value, I am missing what it provides.

The ability to lend and receive loans valued in USD and not bitcoins.

ThaddeusB

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Activity: 84

Merit: 10

Quote from: miTgiB on February 19, 2013, 04:55:43 PM

Quote from: Tulkas on February 19, 2013, 04:46:07 PM

Quote from: miTgiB on February 19, 2013, 02:51:56 PM

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose. You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

Please, read the OP again.

If you borrow 10 bitcoins today, to pay next month, you will theoretically pay aprox. USD $300.

Now suppose that in 10 days the bitcoin price jumps to USD$ 1000.00 per bitcoin, you still need to pay 10 bitcoins back, but now you will need USD$ 10,000.00 to buy 10 bitcoins!

But why value does it add? I agree you used the wrong word calling it a hedge, but other than informational value, I am missing what it provides.

From the OP:

Quote

You borrow 30.0 BTC today, to pay next month, suppose BTC is at USD$30.00.

Next month you will make the payment, BTC price is now USD$ 60, instead of paying 30 BTC back, you will pay 15 BTC, the amount in MtGox USD remains constant.

Simply put, you are getting a loan based on the value of USD (or whatever currency) but paying in BTC. If you borrow $300 of BTC at 10% you pay back in $330 of BTC. Instead of the number of BTC at payback being determined, the value of the BTC is. If BTC rises significantly durign the loan period, you may end up owing less BTC than you borrowed. OTOH, if it falls a lot you may owe 2x or 3x as much BTC.

Whatever one wants to call it, such a loan is exactly equivalent to a USD loan, but with the funds delivered and returned in BTC.

miTgiB

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Activity: 251

Merit: 100

Du hast

Quote from: Tulkas on February 19, 2013, 04:46:07 PM

Quote from: miTgiB on February 19, 2013, 02:51:56 PM

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose. You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

Please, read the OP again.

If you borrow 10 bitcoins today, to pay next month, you will theoretically pay aprox. USD $300.

Now suppose that in 10 days the bitcoin price jumps to USD$ 1000.00 per bitcoin, you still need to pay 10 bitcoins back, but now you will need USD$ 10,000.00 to buy 10 bitcoins!

But what value does it add? I agree you used the wrong word calling it a hedge, but other than informational value, I am missing what it provides.

Tulkas

sr. member

Activity: 352

Merit: 250

Founder, BTCJAM

Quote from: miTgiB on February 19, 2013, 02:51:56 PM

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose. You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

Please, read the OP again.

If you borrow 10 bitcoins today, to pay next month, you will theoretically pay aprox. USD $300.

Now suppose that in 10 days the bitcoin price jumps to USD$ 1000.00 per bitcoin, you still need to pay 10 bitcoins back, but now you will need USD$ 10,000.00 to buy 10 bitcoins!

boonies4u

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Activity: 826

Merit: 1000

Quote from: Tulkas on February 19, 2013, 02:09:58 PM

Quote from: ThaddeusB on February 19, 2013, 01:56:00 PM

Right, which means the loan is actually a USD (or Euro or whatever) loan however you want to spin it. The value of BTC never enters into it; is just payable in BTC. This is not a hedge. A hedge is a position that protects against the risk in another position. A true hedge would be to lend 10 BTC and then go sell short 10 BTC at $X, or more likely to buy an option to sell 10 BTC at $X. Posting a link to the Wikipedia article on hedge doesn't make what you are offering a hedge. (Incidentally, from the very first line of said article: "A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment." There is no companion investment in what you are doing.)

But whether you are offering is properly called a hedge or not is not really important. However, you failed to answer actual question in my post, so I went to the site and did it myself: it appears that the buyer decides payback calculation when they create a loan.

Since there's no USD/Euro/etc involved the loan is in Bitcoin. Perhaps hedge is not the exact word for it, I failed to find a better one, perhaps you can suggest an alternative.

The payback calculation is done by the system based on the exchange rate for the reference currency at the payment moment.

Is there anything that can be done for a loan that was already created? (with lenders approval ofcourse) While the recent rise in trading value of bitcoin does mean that I owe more (in terms of USD) I am still able to pay it off, but the price may jump to a point that I am unable to.

miTgiB

full member

Activity: 251

Merit: 100

Du hast

Quote from: Tulkas on February 19, 2013, 02:09:58 PM

Quote from: ThaddeusB on February 19, 2013, 01:56:00 PM

Right, which means the loan is actually a USD (or Euro or whatever) loan however you want to spin it. The value of BTC never enters into it; is just payable in BTC. This is not a hedge. A hedge is a position that protects against the risk in another position. A true hedge would be to lend 10 BTC and then go sell short 10 BTC at $X, or more likely to buy an option to sell 10 BTC at $X. Posting a link to the Wikipedia article on hedge doesn't make what you are offering a hedge. (Incidentally, from the very first line of said article: "A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment." There is no companion investment in what you are doing.)

But whether you are offering is properly called a hedge or not is not really important. However, you failed to answer actual question in my post, so I went to the site and did it myself: it appears that the buyer decides payback calculation when they create a loan.

Since there's no USD/Euro/etc involved the loan is in Bitcoin. Perhaps hedge is not the exact word for it, I failed to find a better one, perhaps you can suggest an alternative.

The payback calculation is done by the system based on the exchange rate for the reference currency at the payment moment.

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose. You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

Tulkas

sr. member

Activity: 352

Merit: 250

Founder, BTCJAM

Quote from: ThaddeusB on February 19, 2013, 01:56:00 PM

Right, which means the loan is actually a USD (or Euro or whatever) loan however you want to spin it. The value of BTC never enters into it; is just payable in BTC. This is not a hedge. A hedge is a position that protects against the risk in another position. A true hedge would be to lend 10 BTC and then go sell short 10 BTC at $X, or more likely to buy an option to sell 10 BTC at $X. Posting a link to the Wikipedia article on hedge doesn't make what you are offering a hedge. (Incidentally, from the very first line of said article: "A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment." There is no companion investment in what you are doing.)

But whether you are offering is properly called a hedge or not is not really important. However, you failed to answer actual question in my post, so I went to the site and did it myself: it appears that the buyer decides payback calculation when they create a loan.

Since there's no USD/Euro/etc involved the loan is in Bitcoin. Perhaps hedge is not the exact word for it, I failed to find a better one, perhaps you can suggest an alternative.

The payback calculation is done by the system based on the exchange rate for the reference currency at the payment moment.

ThaddeusB

member

Activity: 84

Merit: 10

Quote from: Tulkas on February 19, 2013, 01:17:17 PM

Quote from: ThaddeusB on February 19, 2013, 11:53:47 AM

I don't think this is actually hedging at all, but rather allowing loans denominated in other currencies but settled in BTC...

Who decides on the "hedge"? The borrower when creating the listing or the lender when funding?

The loan is still denominated in Bitcoin.

When the listing is activated the aquivalent amount of the loan is calculated using the other currency.

When the payments are made, the amount to be paid in bitcoin is calculated using the current exchange rate (accordingly to MtGox) with the target currency.

http://en.wikipedia.org/wiki/Hedge_(finance)#Categories_of_hedgeable_risk
http://en.wikipedia.org/wiki/Currency_risk

Right, which means the loan is actually a USD (or Euro or whatever) loan however you want to spin it. The value of BTC never enters into it; is just payable in BTC. This is not a hedge. A hedge is a position that protects against the risk in another position. A true hedge would be to lend 10 BTC and then go sell short 10 BTC at $X, or more likely to buy an option to sell 10 BTC at $X. Posting a link to the Wikipedia article on hedge doesn't make what you are offering a hedge. (Incidentally, from the very first line of said article: "A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment." There is no companion investment in what you are doing.)

But whether you are offering is properly called a hedge or not is not really important. However, you failed to answer actual question in my post, so I went to the site and did it myself: it appears that the buyer decides payback calculation when they create a loan.

Tulkas

sr. member

Activity: 352

Merit: 250

Founder, BTCJAM

Quote from: ThaddeusB on February 19, 2013, 11:53:47 AM

I don't think this is actually hedging at all, but rather allowing loans denominated in other currencies but settled in BTC...

Who decides on the "hedge"? The borrower when creating the listing or the lender when funding?

The loan is still denominated in Bitcoin.

When the listing is activated the aquivalent amount of the loan is calculated using the other currency.

When the payments are made, the amount to be paid in bitcoin is calculated using the current exchange rate (accordingly to MtGox) with the target currency.

http://en.wikipedia.org/wiki/Hedge_(finance)#Categories_of_hedgeable_risk
http://en.wikipedia.org/wiki/Currency_risk

ThaddeusB

member

Activity: 84

Merit: 10

I don't think this is actually hedging at all, but rather allowing loans denominated in other currencies but settled in BTC...

Who decides on the "hedge"? The borrower when creating the listing or the lender when funding?

Tulkas

sr. member

Activity: 352

Merit: 250

Founder, BTCJAM

Hello,

Now you can denominate your loans in other currencies. At every payout the total value in bitcoin will be calculated using the current MtGox exchange rate.

Motivation: protect from fluctuations in bitcoin price.

Example:

You borrow 30.0 BTC today, to pay next month, suppose BTC is at USD$30.00.

Next month you will make the payment, BTC price is now USD$ 60, instead of paying 30 BTC back, you will pay 15 BTC, the amount in MtGox USD remains constant.

You can hedge your loans with:

Bitcoin - same as before
MtGoxUSD
MtGoxEUR
MtGoxRU

Topic: [ANN BTCJam] - Loans denominated in other currencies (USD/EUR/RU) - page 2. (Read 3537 times)