Hi to all. If anyone here has invested in STOs, I would be interested in your (ongoing) experiences.
I made a small investment in the Bitbond STO (managed by Solaris Bank), mostly because I found it interesting to take part in one of the first STOs. This is a bond issued by German bitcoin-based lender Bitbond. I received my first coupon at the beginning of October (in BB1 tokens).
I see this as a high-risk investment, mostly because coupons and principal are paid out in crypto (Stellar). I imagine that when principal is paid out at the end of the bond term, the market will be flooded with bondholders trying to sell their Stellar for hard cash - assuming Stellar lasts that long. I’m keeping my fingers crossed.
Anyway, I will document my experience here as time goes by.
I am afraid that I will look over pessimistic, outdated and simply boring but this concept of STO goes beyond my understanding. It seems that negative interest makes everything possible. I have two question that Daniel could answer to help me.
Which percent of the principal is the coupon and how frequently is it paid?
How do you assess the two risks behind this product: Currency risk and default risk?
For me, the main problem is the payment in Stellar… BTC and others have been volatile but they have some value… but stellar has lost more than 300% value in one year without sings to turn up !!!
Wow, I did not know that bitbond still existed. I registered and put a little money to play there in 2014. The experience was pretty bad but things might have changed.
It was very amateur and many loans defaulted. According to their website my ROI is -30%
EDIT: I still have 0.00374999 btc there ! closer and closer to FIRE
The BB1 token is fixed to the euro, so the principal and coupons only fluctuate in value with the euro. The exchange risk is EUR/XLM (upon withdrawal) and then XLM to whatever fiat currency you sell it for.
The fixed coupon is 4% per annum, paid out quarterly (as BB1 tokens). The contact includes the option of Bitbond paying additional dividends based on good performance, but so far I have only gotten the fixed coupon.
I invested 1000 euros in this experiment. I got a 5% discount rate because I invested early. So my initial principal was 1050 BB1 tokens. I received my first quarterly coupon payment on October 1. The bond allows for accrual, so I will leave the coupons there to earn more interest.
I have participated in the Lykke ICO three years ago. The Lykke coin is a stake token, which is basically a stock. The coin has gone up 1000% at one point but is now up “only” about 250% from the ICO price. The company Lykke is a crypto exchange. Trading volume is light, but there are no commissions. Counter to platforms like eToro, which also profess that their trading is free, Lykke is truly free and you an use limit orders. You are probably right that cryptos are highly speculative. Stellar is in my opinion a relatively save bet, as it is supported by IBM.
As to cryptos in general: I believe that bitcoin and either are relatively save bets and that they have very substantial upside. The jury is still out as to what the ultimate purpose of cryptos is: money (store of value as in bitcoin and/or medium of exchange as in litecoin), utility coin, as in ether or some other purpose, such as money laundering or other illegitimate purposes.
Yes. 100 shares of the Lykke coin represent 1 share of the Lykke AG. Theoretically you can exchange the 100 Lykke coins for one share each. I have not tried that yet. The conversion from tokens to shares is done off chain.
As to Lykke: the company is legit, with a serious CEO and solid team. Also, TA Media is an investor. However, they don´t understand basic trading principles, such as bid/ask spread, market making, marketing and engaging their fan base. Hence, volume is very thin on most currency pairs. They are currently in the process of obtaining a license for a regulated exchange in Switzerland.
Yes. I have checked it out. It is a solid concept, but they are not the only ones doing reward programs on the blockchain. It is a solid concept, as you can swap reward coins between various rewards programs, withouth the outrageously high fees of other programs, such as Points.com. But I think in the end, as with all startups, it is not so critical what kind of idea you have, but more importantly, how well you can execute and how passionate and harmonious your team is.
As to crypto investments: I would stay away from packaged deals, be it bonds, loans or some mining sceme. The fees are usually very high and the offer is designed for “dumb retail folk” that want to get the immediate benefit (such as 317% return in two weeks…) without doing the work. I you believe that crypto has a future, all I would do is $-cost average small monthly amounts into BTC and ETH (ether) …
I feel you. So far the actual EUR value of my STO bond coupons has consistently been much lower than the agreed on 4% of the EUR 1000 face value because of the falling value of Stellar Lumens. The actual coupon has been more like 2% in real money. If I would sell the Stellar Lumens immediately when the coupons are paid, the value would be closer to the agreed coupon, but I’m hanging onto them for the odd event of another spike.
The truth is, while the whole STO thing has been an interesting experience, it just adds a whole other layer of work and exchange risk over getting a regular bond. You get paid coupons in crypto, which you then have to exchange to fiat - very likely at a loss. You get your principal back in some form of crypto or token which you then have to sell - possibly also at a loss.
The concept of using blockchain tokens as securities is certainly interesting, but conversions of principal and coupons into fiat would have to be automated to deliver equivalent value to regular fiat-denominated securities. That isn’t the case with the Bitbond STO.
Sure, there is the odd chance that the denominating crypto will spike and you will achieve an added capital gain that way, but that certainly hasn’t been the case with Stellar Lumens so far. Anyway, like I said, it’s been an interesting experiment, and I’ll hang onto those coupons and hope for a December-2017-style crypto bubble.
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