Of my 10 Rules that I follow that lead to profitable Bitcoin lending, one of the ones that is the most different from lending in USD is Rule #5. The ebook will be out soon for those who have been asking. Rule 5 says to Never Invest in a Borrower's Biggest Loan to Date. Let's see why.
The most consistent scam in the BTC p2p lending world is to borrow small and pay it off, borrow a little bigger and pay that off and then borrow really big and run with it. One guy did it with 70 BTC off of BTCJam and it was so obvious what he was doing that he was reported to the Feds and they eventually got him for theft since he clearly had no intention of even trying to repay. Here is another example of how it works below:
This was one of the worst scams seen in our BTC world and it clearly follows this pattern. Notice how the borrowing starts small and grows from 1 to 2 to 4 to 30. Many scammers would try to run at 30 but this guy, Griff, paid the 30 and then borrowed and walked with 60 BTC. That’s twice the amount. This is the smarter scam.
I have personally violated this law 3 times and once was a clear scam like Griff above, one other one defaulted due to running into financial trouble and the 3rd paid off. Never again.
There is one exception to this rule and that is Loan Size. If the loan is below 10 BTC (currently around $3000), and I am otherwise comfortable, I will consider investing. Don’t be your borrower’s biggest lender.
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