Quote from: ex-trader on September 26, 2013, 09:08:59 PM

Quote from: Rannasha on September 26, 2013, 08:02:05 PM

http://ge.tt/5UxhJ8t/v/0?c
Opened the .ods in LibreOffice and saved as .xls. Didn't check to see whether the conversion went okay.

Thanks for that, that opened straight away.

Looking through that at a high level it shows exactly what I expected.

Bitcoin falls from $230 to $56 and in turn the equity in the company (it's shareholder value) falls from $2.1m to $800k. That is with only $2.5m of total deposits to start with vs almost identical capital. Obviously this scales up if the deposits are larger and there's no way this business will be a success with only $2.5m of deposits.

It's really simple, if you claim to make money from BTC rising value then you (or your customers) must lose if it goes down. The risk profile is symmetric, unless you add assymetry via external option purchases, which are not mentioned (and no-one could write the volumes anyway).

This business is not a bank, it's a bet.

I suggest Neo can attempt to disprove this by showing what the profitability looks like with a 5% decline every month for a year and with substantial deposits. The reason is must be done like this is usually it's hard to make perhaps 1-3% on gross interest margin, so you need deposits that exceed your capital by a large factor to make profits once costs are accounted for. Most banks have leverage ratios (assets/capital) of 20-30 for that reason.

Options purchases have already been mentioned earlier.

Quote from: cryptocyprus on September 07, 2013, 06:39:10 PM

(...)
We shall operate our own reserves for trading both EUR & BTC and not deposits, our strategy will be constantly monitored and adjusted. Not every BTC and Euro will be derived from the public markets and we also have several options on futures. Our strategies will be kept private because we do not want to buy off the back of our own hype, this will be partly unavoidable but we will be doing everything we can to mitigate that risk.

If someone withdraws 5m and other withdrawals that day alone make the total 7m, we will also take deposits that day at the same price point, even if the deposits that day total 5m we will already be in a strong position because we would have the trading benefits of adding that 7m to the market prior to the decrease, increasing the strength of our own reserves.
(...)

Quote from: cryptocyprus on September 18, 2013, 05:24:32 PM

(...)
This spreadsheet provides details that will enable you to input different parameters (The Blue Cells) to see the effects they will have on our reserves, we have omitted any parts in relation to options trading, so trades on the spreadsheet are very simple public and dark pool markets, even with a crude strategy with the figures that are a direct replica of the seven days when the price of Bitcoin took its fall following the April bubble we would be damaged, but still very much in business. The key figure to watch is "the next day BTC requirement" as this will indicate the amount of Bitcoin that will either be added to our reserves when balancing the customers wallet for the next day, or how many BTC we need to use from our reserves to top up the customers wallets.

www.lmb-holdings.com/opening_week_crash.ods
(...)