Topic: Interesting Tidbit on Pirate - Charging rates on large BTC transfers? - page 2. (Read 3390 times)

I am going to take a guess but if it ever was a real venture it "went wrong" with the borrowing at 3400% APR.  

To allow us extra liquidity we took out a BTC line of credit at 29.61% APR and secure the right to repay within 30 days notice.  Even that interest rate is a significant expense and one we watch everyday to weight the utility vs the cost.  So far the utility makes it a worthwhile expense but if that ever changes we will drop it like a hot potato. 

3,400% APR?  LOLZ.  No business borrows at 3,400% APR.  Hell even the mob doesn't charge 3,400% APR because it will kill any profitable venture and bleeding a company over time is far more profitable.

Anyone who has tried to move between real cash<->bitcoins quickly has experienced the 'joy' that is gox/dwolla/wire/etc. It's impossible to do fast.

Spot Rates are a very common thing in the financial / commodity world. People pay extra for speed and guarantee. Seems not so far fetched to me that someone made a very profitable business out of doing that for bitcoin. Not sure where it went wrong, but someone obviously miscalculated somewhere.

I didnt say it was believable but this is the business model pirate himself posted in  a thread.  The fact pirate never dealt with any of the large bitcoin sellers out there is telling.

Reminded me of that post :

I can't imagine anyone needing to move that amount of coins paying 10% over/under market prices. I mean they got to be about the stupidest rich people I know.  We sell very large blocks of coins (largest deals in the mid four figures of BTC) and I can't imagine we would sell any (much less 500K BTC a week continually for months) if we raised our fee to 10%.  I also know (indirectly from clients) that another major company does direct sales of large amounts of bitcoins at roughly market rates so we aren't the only ones.

I mean what idiot buys a commodity at 10% over price.  Slippage on a 1000 BTC is closer to 1%.  Hell you could get a 10 homeless people to walk into CVS using Bitstant and move $10,000 a day.  The fee would still be cheaper (and less risk).   Buying coins from a guy named Pirate on the internet for 10% over cost has to win the darwin award for both the riskiest and most expensive way to buy coins.

Also one would have to believe that demand was so good that he never needed to reduce his LoC.  Not once, not a single slow day.  The days prices spiked up 30% in a day his business never skipped a beat.  He maxed out available sales, day after day after day.  He just borrowed 500K and never needed a bitcent less.  Well actually he borrowed as much as people would give and rolled over all interest as long as they wanted.  That just happened to be 500K there is no evidence he would't have borrowed 10x as much if people were wiling to lend it to him.  Still even if true wouldn't he have used this never ending fountain of unbelievable profits to pay down his debt and keep more and more of the gross profit for himself?

So Pirate
a) found the largest collection of rich idiots on the planet
b) had so much demand he never needed to cap deposits, return funds, or disallowed compounding the interest
c) despite that gold mine it never occurred to him he would have more net profits if he paid down his debt?

I guess some people will believe just about anything.

Its not that easy to get large amounts of bitcoins easily and without a money trail. For all we know he was hiding assets in divorce cases. There are many cases where people would want to avoid scrutiny when moving cash around.

The question then becomes where did pirate get large amounts of bitcoins from to sell for cash ? There could still be a  money trail with such large cash movements.

Why did he not announce 0 interest after closing down though. He's also stated he didn't have the coins to do a full payout. Doesn't add up if it was all on fast bitcoin transfers.

As to AML, that mainly affects financial institutions. Tax would apply on the USD gained, though, and thus reduce actual profits realized. Assuming he was above board.

How illegal would this be?  I mean, if he's handling lots of coins, wouldn't he be subject to AML?  For all we know, he could be laundering money for terrorists!

/panic

This is one theory going around. It would be worth a fee to route around ID requirements on Mt Gox et al.

I so found this tidbit about Pirate on r/bitcoin:


[–]px403 4 points 1 day ago
I used to buy coins from him in blocks of 100 and 500, and I was one of his smaller customers. He has an extremely good reputation for being able to move a ton of coins very quickly. I never invested in his savings and trust though. From my observations, his business would be greatly helped by the higher liquidity granted by large numbers of investors, and at the premiums he charges for large volumes of bitcoins transferred quickly, he could easily pay back 7%, at least for short periods of time.
The 7% was his highest rates too, and he dropped them when he had more investors than he needed. When more investors dropped out than expected, he likely got frustrated and decided to go back to handling the liquidity himself.
That said, it will be very interesting to see of he can pull off a clean dismount without going broke himself, but I do think that it's very possible. Will be fun to watch :-)


I could care less about the speculation in the bottom part, but the discussion of his possible business model did. Could he be offering to buy/sell large amounts of bitcoins quickly for fees? I could see this as being somewhat valuable, but I don't really have much knowledge on  BTC exchanges. If he could offer a way around the huge price spikes/declines when someone buys/sell a large amount of coins, i could see it being a source of income.

Could anyone offer some info/speculation on this? Try to refrain from talking about ponzis and focus on the actual value created by this service and the exchange risks.