I had intention to write a fast and easy post about the result of my investments at BTCJAM. I count result of my investments there since day of first deposit March 14, 2015. Post was planned to come in 20-30 minutes. But… I got surprise!
In calculations I use risk adjusted value of portfolio:
Value of portfolio = [Cash+Pending] +Receivables – Overdue x 150% x 90%
where last 90% is result of my assumption that 10% of Overdue will recover or will be sold.
To calculate Value of Portfolio I add the following numbers
For monitoring I calculate value of portfolio after 270 days (Today+270). This corelates with average duration of my portfolio that is growing, but still not exceeding 265 days.
In invest in both Currency-tied and BTC loans. BTCJAM is telling me that my return is basically over 10% (picture on left).
I am doing my own calculation, I was happy. All was quite ok or normal. Before today. Today I got drop of my risk adjusted return from +22% (last month) to just +1.6%!
That was shock!
My first idea was about new big Overdue loans. I know that Joe Maristela, Gennaview are big borrowers and they are late now. But that is still not so big amounts to make so huge drop. After longer look I understood that currency-tied loans made biggest effect on significant drop of my XIRR value.
I have over 50% of my loans currency-tied. With recent rise of BTC price from 220-250-270$ per BTC to 380-350-330$, my borrowers pay back much less BTC and my XIRR measured in BTC went down significantly. I got serious question, if way I measure result and if way I do my investments are correct.
I recalculated return, using USD. I tested what is my current risk adjusted return with different USD price.
That are numbers that I like much more than 1.6% (return based on BTC).
Clear with difference, but what is correct way to invest?
Some of us will tell – “we leave in normal currency world and it is right to calculate return in our home currency”. Another opinion – we do investments at BTC based Platform, so, right way is to calculate return in BTC. “Price of BTC will grow long run”, they add.
Will it help if Platform will give us 2 ‘virtual’ accounts, allowing us to allocate part of money to tied loans and strict part of money to invest in BTC tied loans? Such virtual accounts protect us from mixing dollars with btc. But, do we need then separate account for USD, RUR, BRL, etc?
I worry about a lot of “mixed” loans, when I invest at first in BTC loan later at some point in USD-tied loan or vise-versa. I worry that such loans may give at the end very bad return. I did such excel
It simulates few scenarios. We invest twice @5% month. Then we wait one month and calculate result using estimated BTC price.
Scenario 1 and Scenario 2 demonstrates investment in TIED loan when price of BTC goes down-up-up (from initial 270$ per BTC to 220$, then 240$ and finally 350$ per BTC) or up-down-up.
Scenario 3 – pure investment only in BTC tied loan.
Scenario 4-6 when I invest first in TIED loan and then switch to invest in BTC tied loan or first investing in BTC tied loan and later in USD tied.
As we can see, Final return may be very different and difference may be bigger than 10%. Switch in investment strategy may be very positive and as well very negative.
So. Question to you, dear Investors: how to calculate return right way and what is the best investment strategy?
p.s. There you can download excel for BTC-TIED play. I and all new readers of this blog will be very glad if you will share your founding!