5 mins

Bitbond STO: The Benefits Of Investing In Bonds

Mollie Thick
April 4th, 2019

If you are reading this you are probably aware that Bitbond Finance is currently running Germany’s first Security Token Offering!

If you don't know what the Bitbond STO then check out this article!

*Financial Terminology breakdown below

But what does this mean for you?

It means you and any member of the public, except Canadian and US citizens (sorry guys) can invest in Bitbond via the Bitbond token (BB1).

A quick summary of Bitbond:

  • Bitbond is a German blockchain platform that established itself in 2013 as the first global lender to small and medium-sized (SME) businesses
  • Bitbond has generated over 15 Million USD in loan volume from over 80 different countries
  • With the funds raised from the STO Bitbond originates business loans around the globe to grow its platform

Now we have given you a quick summary of Bitbond's business model, let us break down what the Bitbond token is and more importantly what returns you stand to make!

First, it is important to clarify the Bitbond token (BB1) is not a currency or coin, like Bitcoin or Ether, but rather a financial instrument comparable to a bond.

Essentially BB1 is a bond issued and serviced on the blockchain, hence a tokenized bond.

What is a Bond?

A bond is a traditional financial instrument that represents a debt obligation and thus works as a form of borrowing.

In terms of the Bitbond token, the investor buys a bond (debt obligation), meaning they own the obligation and right for Bitbond to pay them back after the bond matures. During the period to maturity, bondholders receive interest ( a so-called coupon*) on their investment.

BB1 token holders receive five payments per year, broken down like this:

  • Four quarterly payments of 1% fixed interest, adding up to 4% fixed interest per year
  • One variable interest payment which is dependent on the performance of the underlying loans and paid out annually

 The proceeds from the BB1 token offering will be invested into loans of business owners. This is a fast-growing market that is under-served by banks.

The total return to BB1 token holders depends on the performance of the underlying portfolio of loans. A realistic scenario is that the total amount of interest will be 8% per year. For further details, check out our EU complaint securities prospectus*.

The BB1 token has a maturity* of 10 years, which means Bitbond Finance buys back the BB1 token after 10 years at its face value of €1 – regardless of whether the investor received a discount

What are the benefits of investing in a bond?

Bonds provide a so-called fixed income. While this is true of other investment options, bonds offer more stable cash streams. In regards to the Bitbond token, investors will receive quarterly payments (coupons*) as well as one annual payout. This is a steady income flow that can be counted on and planned around year on year.

Bonds also provide diversification. As an investor, you don’t want to ‘put all your eggs in one basket’, as cliche, as this saying is the principle, stands true. You reduce investment risk factors by having a diverse investment portfolio. Market volatility is a fear for every investor and bonds help subside this fear and help to preserve capital. Which can be key for equity investors when a stock market is falling.

With the Bitbond token, you also get double the portfolio diversification! As the funds raised from the Bitbond token are being re-invested into Bitbond’s SME lending platform. So everybody who invests in the BB1 token has an exposure to a highly diversified portfolio of small business loans as well!

The final and one of the biggest perks of investing in a bond is the Yield to Maturity!

What is Yield to Maturity?

Yield to maturity is the total  anticipated return on a bond if it is held to its maturity*. So in regards to the Bitbond token, it is the anticipated returns if an investor held BB1 until the end of the 10 year maturity* period.

In regards to the Bitbond STO’s yield to maturity, the graph below is the estimated profit for an investment of €10,000 at €0.90.


Scenario A – high return on the underlying loan portfolio:

Total return: EUR 20,355

IRR: 9.5% / 2.0x

Scenario B – medium return on the underlying loan portfolio:

Total return: EUR 19,155

IRR: 8.5% / 1.9x

Scenario C – lower return on the underlying loan portfolio:

Total return: EUR 17,955

IRR: 7.4% / 1.8x

Conclusion

Overall the Bitbond STO is a traditional financial instrument held on the blockchain. It is not this high-risk and the rush like other crypto investments. But now is the time to say goodbye to s**t coins and invest wisely.

Secure and stable doesn't equal boring, it equals real tangible and dependable returns. The Bitbond token is a chance for everyone worldwide (well nearly, sorry again Canadian and US Citizens) to invest in an EU compliant and traditional financial instrument held on the blockchain.

And that is that what blockchain is all about, improving traditional systems and making them more efficient and accessible to everyone!

Invest in BB1 not for that crypto altcoin rush but for stable cash-flows that will increase your income annually.

In case you’re not familiar with the *Financial Terminology

Coupon*: A coupon rate is an amount paid by fixed-income securities (so a bond in this case). For the BB1 Token, the coupon represents the interest on the investment.  

The Bitbond token has two coupons a fixed coupon of 4% p.a. paid out in four quarterly payments of 1% as well as a 60% pre-tax profit share paid out annually.

Maturity: In relation to bonds, maturity is the time between when the bond issued and when the bond matures.

For the BB1 token, the maturity period is 10 years. This is when Bitbond Finance will buy back all its tokens for their original value of €1. So if you buy 10,000 BB1 tokens today (1 BB1 = €1), you would receive €10,000 back in 10 years time!

Securities Prospectus*: A prospectus in finance is a disclosure document that provides details about an investment offering.

The Bitbond STO prospectus is written in compliance with EU Prospectus Regulation and was approved by BaFin, the German regulatory body for financial services.

Read our Securities Prospectus here

GERMANY'S FIRST SECURITY TOKEN OFFERING*

Invest in the Bitbond STO and ensure secure returns.
Grow your portfolio.
  • Earn a fixed 4% annual interest
  • Earn an annual variable coupon
  • Earn via an attractive affiliate program
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Germany's first security token offering.*
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*Bitbond Finance GmbH is a Bitbond GmbH subsidiary. Bitbond GmbH owns 100% of Bitbond Finance GmbH. This content represents solely a nonbinding preliminary information which serves exclusively advertising purposes. The content is neither an offer nor a solicitation of an offer to purchase token or securities issued by Bitbond Finance GmbH. The information in these pages does not constitute investment advice or investment recommendation. The greatest possible care has been taken in the preparation of this content, but errors and omissions remain reserved.

Please find the binding Bitbond STO prospectus here.

A non-binding English translation of the Bitbond STO prospectus could be found here.
GERMANY'S FIRST SECURITY TOKEN OFFERING*
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