The days of the American Frontier were interesting times in history, particularly in terms of money and banking. There was no Federal Reserve, ECB, BOJ, or IMF. Money was mainly coinage that contained small amounts of gold and silver that gave it value. Banks were largely unregulated and made lending decisions based creditworthiness (ability to repay) and market conditions. People knew there were risks involved in keeping money in the bank, however they were compensated for that risk by receiving interest payments on their deposits.
Fast Forward a couple of centuries and the model of the Old West has been left in the dust, so to speak. Money is created limitlessly by the Fed, interest rates are made artificially low by direct asset purchases, and banks no longer evaluate risk properly due to ‘TBTF’ (Too Big Too Fail). With real inflation making the yields on most ‘safe’ fixed income assets actually negative (you are paying them to lend them money!), investors are starved for yield, forcing them to take on more risk more while accepting inferior total rates of return. The traditional banking model has been flipped on its head. Good thing bitcoin exists.
There are is an entire financial ecosystem popping up around bitcoin that allows investors to receive abnormal rates of return, oftentimes in excess of 25% annually, while providing fresh capital to new businesses that can put that money to work immediately. Some of these assets are safer than others, however please keep in mind that all bitcoin related investments are risky, and severe monetary loss is always a possibility (think bank robbers and snake oil salesmen). Please conduct proper due diligence and see our disclaimer here: https://coinconsultancy.com/disclaimer/ for further information.
Dividend Paying Stocks
In the realm of bitcoin investments, shares of company equity that are issued on a third party exchange-like services such as Bitfunder or Havelock Investments are by far the most popular and liquid outside of the bitcoin market itself. The types of companies that are raising funds in this way range from precious metals miners such as Kenilworth Exploration to bitcoin mining behemoths like ASICMiner.
Lets take a closer look at ASICMiner, as it is one of the most established and well-respected companies in the space. Please note, it is still rather difficult to acquire IPO shares issued directly by the company unless you are willing to transact with a member of the bitcointalk.org forum who is in possession of some extra shares. The other way to gain access to this investment is via a ‘pass-through’ (PT) share offered by a number of exchange/investment websites such as those mentioned above. These are full or partial (depending on the offering) claims to IPO shares that behave almost identical to said shares, are fully transferrable, and receive the same dividend rights as IPO shares (minus a small management fee).
So what about the return?! Well, for the past two weeks, shares of ASICMiner have been trading at ~2.5btc/share, and offer an average dividend over the past four weeks (divs paid weekly on Wednesday) of 0.03044/share. This is a weekly dividend yield of 1.218%, which annualized is a staggering 58.45% return! Not to mention the shares themselves have gone from 1.5btc to 2.5btc in the matter of six weeks, a 66.67% return.
In much the same way that stocks can give you steady dividend payments with the potential for capital appreciation, so can investment funds (think ETF’s) that offer the same value proposition but with the added security of diversification. These types of instruments trade on the same sites as you would find ASICMiner shares on, and are bought and sold in the same manner. Bitfunder.com is the best resource for trading and information on funds like those mentioned below.
BTCInvest and TU.SILVER are two funds that allow some options for portfolio diversification. BTCInvest is a diversified fund that consists of shares of a number of bitcoin related companies, such as ASICMiner, as well as a loan/LOC portion of the portfolio dedicated to producing income by lending to bitcoin startups. The assets are actively managed by bitcointalk forum user Trade Fortress, and his reputation is rock solid. BTCInvest has been trading steadily at around 0.20btc/share, up from 0.10btc/share only a month ago, a 100% return. BTCInvest issues a dividend twice a month on the 7th and the 21st, and the average dividend payment over the past two months has been 0.00232btc/share. This is an average dividend yield of 2.32% per month, which annualized is 27.84%. Again, this is head and shoulders above what you could get on anywhere on Wall Street.
TU.SILVER is a physical silver fund that allows you to purchase rights to a certain amount of physical silver using bitcoin that are redeemable at any time for actual physical. I have not invested in this fund as liquidity is limited, but the idea is certainly not terrible. If you are interested, please read more at: https://bitfunder.com/asset/TU.SILVER.
I recently discovered a fantastic service that, if it survives, will change banking and lending in the bitcoin market for years to come. The company is called CoinLenders.com, and it is the brainchild of the aforementioned bitcointalk forum user Trade Fortress. What they do is allow anyone with bitcoin to deposit them on the site (;1btc), either in a savings account or CD, which are then lent out to bitcoin related projects and startups to generate a return on the funds. This return is paid out to the depositors in the form of daily interest payments of around 0.061% (which already has the management fee built-in). This is about 25% APR, without daily compounding. I have put over 5btc into a CoinLenders account, have received daily interest payments on-time, everyday, for a couple of weeks and have successfully withdrawn coins to an external address. This is what banks should look like.
I my humble opinion, the options listed above offer some great ways to generate income on your bitcoins while you’re waiting for them to reach $1000 a piece (like we all are!). I personally own shares of ASICM, the 1/100th PT shares on HavelockInvestments.com, and have successfully bought and sold, as well as deposited and withdrawn with zero complications. I also own shares of BTCInvest, and I currently have bitcoins deposited at CoinLenders.com earning interest as we speak. If Bitcoin is the wild west of finance, then the investments detailed above are the wild west of Bitcoin. I’m willing to get up on that horse and ride, but then again, I am from Texas.
NOTE: All assets discussed in this piece can go to zero. The ecosystem is based solely on trust at this time, which is why I have put my money at risk to ensure these services are trustworthy and reliable enough for the bitcoin public at-large.
Company Disclaimer: https://coinconsultancy.com/disclaimer/
Havelock Investments: https://havelockinvestments.com/
BTC Trading Corp.: https://btct.co/security