
Show HN: TradeMore – Generate a return on your Bitcoin - sdouglas
https://trademoremargin.com
======
geuis
Nope. You gotta build a reputation if you're doing anything with Bitcoin these
days. We've had years of amateur hour and it almost always ends badly. There's
no way you can guarantee a return of 5-10%. There's also no way anyone
responsible is going to let someone else control their btc unless they're
naive.

The only safe place for your Bitcoin is in your own wallet.

~~~
sdouglas
You're right that among the safest places for your bitcoin is your own wallet.
An even safer option is cold storage, using Coinbase, Elliptic etc. But the
success of BTCJam and others suggests that individuals are willing to trade-
off return for risk. Our model is very different from BTCJam, in that your
bitcoin does not get sent to a borrower's private wallet. Bitcoin users by
their nature are early adopters and interested in new ventures and new
companies. We have users lending through us who have been burned badly before,
but still want to try out our new service. We work hard to be as professional
as possible and use industry best practices, including margin calls; stop-loss
trades and a significant capital buffer. But if you're really worried about
'amateur hour' then that is fair enough - we'll try our best to convince you
otherwise, but it's your money.

------
aston
Are there actually folks out there willing to pay a 10%+ a year interest rate
to take a loan denominated in BTC? Bitcoin's price is all over the place, and
often moves up very quickly, so even if the loan were at 0% it would be a bad
idea. But at 10%, you have to ask, are there any ways to invest your loan such
that you could beat that rate? Consistently? The default rate is going to be
sky high.

The only rational explanations here are 1) these people are actually intending
to short Bitcoin and don't realize there are cheaper ways or 2) these people
don't exist, and this is a Ponzi scheme.

The latter seems more likely, especially since this site claims to be covering
losses on defaults (an even crazier idea than taking a BTC loan in the first
place).

~~~
andrewla
Out of curiosity, what are the cheaper ways to short Bitcoin? The only ways
that I'm familiar with involve borrowing bitcoins in some way, for example,
Bitfinex offers what they call "swaps" to facilitate margin trading.

It's pretty clear that the reason for borrowing bitcoins is to allow shorting,
in which case most of the time margin calls can cover the default risk.

To answer your earlier question, "... are there ways to invest your loan such
that you could beat that rate? Consistently? The default rate is going to be
sky high". I think the answer is that at scale, probably not; most people will
lose money while doing heavy margin trading. But most of the time you won't
lose the entire thing, you'll cash out your position at a loss and pay off the
accrued interest. The only time you lose the entire amount is if you approach
margin limits, in which case you'll be automatically liquidated by the
exchange and the fees will be removed. The even more rare case is that the
exchange is not able to liquidate your position because of an exceptionally
large move in the BTC price, in which case the default coverage by the site
becomes applicable.

This isn't to say that TradeMore is a legitimate site that won't steal your
money, I'm just addressing the feasibility of the technique. The fact that
they are a UK based company, with officers published on the site, is some
comfort, though.

------
sdouglas
Hi HackerNews,

I'm the co-founder of TradeMore and we are excited to share with you our
bitcoin lending platform.

We allow individuals to lend out their bitcoin and generate a fixed return.
For those interested in trading and market making, we allow funds to be
borrowed and used to trade on Coinfloor and others.

I'd be very interested to hear any questions or ideas you might have.

Thanks!

~~~
notahacker
Correct me if I'm wrong, but are the following all true

\- You're running this business as a UK limited company named after the
founders, who are based in the UK

\- Your scheme involves third parties, probably outside your control,
performing arbitrage trades on third party platforms in an unstable asset with
variable liquidity characteristics in order to turn BTC into more BTC

\- You're marketing a service as a "loan" offering a "return" within a
specific range and offering assurances about vetting third parties using the
service and covering losses, but don't include even a boilerplate terms of
service or risk warning

\- Nobody on the team has a background in compliance or due diligence

\- You're not Bitcoin billionaires

Assuming the above are true, I hope you have a _very_ good lawyer. Since at a
glance you actually appear to be real, traceable people I'll assume you're
acting in good faith and not running a Ponzi scheme which would be my first
assumption based on the website's claims otherwise, but the chances of you
heading in the same direction as Ponzi-scheme operators in the likely event of
something outside your control going wrong are very high indeed. In all
sincerity, I'd encourage you to trade _less_ unless you have the backing of
someone with a deep understanding of relevant UK law and even deeper pockets.

~~~
sdouglas
Hi notahacker, thanks for the well balanced comment. We're incorporated with
our surnames but operate under the name TradeMore. Alas, we're not Bitcoin
billionaires.

You're right on a number of counts, but I disagree slightly with a couple of
your points. For example, our borrowers are not "outside of our control",
because they only borrow on very specific accounts where we have implemented
stop-loss logic and where the withdrawal address belongs to us. This functions
in a similar way to when you trade through a broker.

We have not included terms of service on our website, and this is something we
should do. However, we do make sure to share the full T&Cs with lenders and
borrowers prior to transacting. Right now these are in the form PDF documents
which outline clearly each parties responsibilities. Send me an email if you
want to take a look.

Point taken about "heading in the direction" of a Ponzi scheme. I know what
you mean. We could say, "oh, we've had a bad week, let's just repay our
existing lenders with our new lenders funds". It's a slippery slope. To avoid
this we separate client funds. So for each our of clients we know where their
funds are at any given time, and do not just let funds flow from one to the
other. Point also taken about trading less. Obviously we want to grow, but not
to the detriment of our quality of service.

On the point of lawyers and legislation in general, we have consulted a number
of lawyers in the UK and US. Generally, the feedback we have received is that
Bitcoin is a very grey area, with most governments in a 'wait and see' mode.
However, we want to act as if we were already a regulated financial
institution and stay ahead of the curve (one day, if the FCA accepts bitcoin
companies into the fold, we will be regulated).

~~~
imaginenore
So what's your plan if you don't gain enough money with your trading scheme?

~~~
sdouglas
Hi imaginenore, are you talking about the situation in which we earn less on
our assets than we owe in our liabilities? In this case we would use our
capital buffer.

~~~
imaginenore
Yes, that's what I meant. How much is your buffer?

------
deweller
Say I lend 1 BTC to a borrower and that borrower defaults on his loan. Your
FAQ says:

> In the event that external markets are not able to fulfill the order
> necessary to close out such positions, TradeMore will act as the
> counterparty to cover losses.

Does this mean that you will return the entire 1 BTC to me as the lender?

~~~
sdouglas
Hi deweller. Yes, in the event that a borrower defaults we will use our own
funds to repay you. Obviously, this requires you placing trust in TradeMore,
but we will work hard to win this trust. One option is to start lending a
small amount through us so that you can see what using our service is like.
Full disclosure: we do not return lender funds in certain 'force majeure'
events, such as a number of exchanges being undermined or entering bankruptcy.
Hence, your funds are more secure in your own wallet or, even better, within
cold storage. But if you are interested in earning a modest return on your
holdings you might want to give us a try.

~~~
lclarkmichalek
So you are, in essence, guaranteeing every loan on your service (excluding the
usual acts of god and stuff)? Assuming that all goes well, where does the
extra 5% come from? As I understand it, the return on a loan is usually a
function of the risk attached to it, and you seem to be saying that your loans
are risk free...

~~~
deweller
I would assume they are lending your BTC to traders for substantially more
than the 5-10% rate that they are paying you. In exchange for taking the risk,
they keep the profits.

~~~
notahacker
Wouldn't a trader who was so Bitcoin-savvy they could make returns well in
excess of 5-10% whilst maintaining the full value of their loan in BTC on
recognised exchanges be smart enough to borrow BTC on less onerous terms from
a pure p2p exchange?

~~~
notahacker
@dweller I understood the leverage aspect as requiring the borrower to deposit
a margin of fiat currency in order to be entitled to borrow 2.5x that value in
BTC, repayable with a >10% APR in BTC, which appears to be confirmed by
sdouglas.[1] If it were the other way round and TradeMore were giving
borrowers access to additional funds on top of lenders', then presumably the
owners of those funds would also expect a return...

@sdouglas As I understand it most other BTC borrowing is done at a fixed
rather than floating interest rate, in which case I can't imagine why anyone
would borrow from you except in those rare cases where liquidity dries up and
they desperately need to borrow? Or why you'd want to lend _only_ during low
liquidity situations (or to incompetent borrowers) and only to borrowers whose
trading position is exposed by that lack of liquidity?

[1]As a footnote, if I were running a business with that model I'd be happiest
if the BTC ecosystem crashed, in which case my BTC liabilities and all the
defaulting BTC loans might be worth less than the nice juicy chunks of fiat.
It would be like holding subprime mortgages if house prices massively and
unexpectedly soared!

~~~
sdouglas
Hi notahacker, the initial margin deposit is in bitcoin (apologies if we did
not make this clear) since lender funds are also in bitcoin. Regarding
fixed/floating: if you are borrowing on an exchange such as Bitfinex then for
any one currency swap the interest rate is fixed, but these swaps are
typically short term and so when you come to refinance a position you could
find yourself facing significantly higher rates than you had previously. Since
(at least in the short term) our earnings will be all be in bitcoin, a
collapse in the price of bitcoin would be very bad news for us.

------
jellicle
So, how is your application to become a bank going? Where did you get the 5
million pound startup capital required?

[http://www.fca.org.uk/firms/about-authorisation/dual-
regulat...](http://www.fca.org.uk/firms/about-authorisation/dual-regulated-
firms/banking-applications/should-i-become-a-bank)

Also, have you picked out which non-extraditing island nation you'll be
retiring to after you claim that "hackers" stole all your bitcoins and forced
the shutdown of your business?

------
ascorbic
Have you consulted with a lawyer specialising in English financial services
regulations? It seems pretty clear that you're performing activities that
require you to be authorised by the Financial Conduct Authority[1]. Have you
spoken to them? The fact you're lending and borrowing BTC rather than GBP
makes no difference to the requirements. Bitcoin isn't magic no-rules money.
You're risking prison and large fines.

[1] [http://www.fca.org.uk/firms/about-authorisation/do-i-need-
to...](http://www.fca.org.uk/firms/about-authorisation/do-i-need-to-be-
authorised)

~~~
sdouglas
Hi ascorbic. Thanks for pointing us in the direction of the FCA, it’s good to
get as many opinions on this as possible. Yes, we have consulted a lawyer
specialising in English financial services regulation, as well as closely
reading the FSMA Act 2000. I agree that bitcoin isn’t a ‘no-rules’ money, but
I disagree that there is no difference in the requirements. This is because
bitcoin and other digital currencies are not specified investments under FSMA
(the relevant section of FSMA is 22). In our opinion it would be good for
digital currencies if they were a specified investment, but currently they are
not, and therefore they are not subject to the same regulations as cash or
other traditional financial instruments. If you think I’m wrong please push
back. This is an important point to clarify not just for us but other
businesses in this space.

------
deweller
As a lender, may I use the service anonymously? Or do you require KYC account
verification?

------
nether
5-10% returns is about the same as Lending Club (my five year average with LC
is 7%) but with MUCH more volatility. On a risk-adjust basis, this seems to be
a poor investment.

------
dlss
FYI, the register form doesn't display for adblock plus users -- forms usually
do, so this was quite confusing. It looked like you weren't accepting new
users.

~~~
sdouglas
Thanks very much for this. We were actually aware of this already
(specifically, it's an issue with the Fanboy Annoyances feature on Adblock)
but we thought that, on balance, so few people would have this specific
feature enabled that we would go without an ugly box altering them to this
fact. Obviously some people do have it enabled - sorry it it cause
inconvenience. I hope your comment stays near the top for clarification.

~~~
dlss
Makes sense. I'd expect the bitcoin owning population to have many more ABP
users than the general population though.

Re: adding a black box.

It looks like just not using "mc_embed_signup" and "mc-embedded-subscribe-
form" as the form's id and class would solve the problem. Elements with those
classes and ids are display:none'd by ABP.

(You can verify this yourself by enabling adblock plus, then inspecting the
element)

~~~
sdouglas
Great tip, thank you very much for this.

------
pfisch
How is this not a Ponzi scheme? This seems to fit the definition exactly.

~~~
deweller
A Ponzi scheme is is where the operator pays returns to its investors out of
the money brought in by new investors. That is not what is going on here.

TradeMore lends your money to borrowers who then pay the money back with
interest. That is where the profit comes from.

If only 2 people use the system (1 lender and 1 borrower) the model still
works. It does not depend on new investors to pay profits to previous
investors.

~~~
runako
>>> TradeMore lends your money to borrowers who then pay the money back with
interest. That is where the profit comes from.

Isn't that the traditional definition of a bank? Curious how you're able to
circumvent the UK regulations that would appear to require registration as a
bank.

~~~
nether
Not really. They don't do personal savings accounts. It seems to be just like
Lending Club except using BTC.

