{ "episodeId": "SLP720", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "stephan_livera": { "name": "Stephan Livera", "role": "guest", "tag": "STEPHAN" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.12, "text": "Leveraging yourself to the max and borrowing against all of your, your stack and not having any sort of contingency plan for what would happen if the price decreases, I think, is a recipe" }, { "speaker": "stephan_livera", "time": "00:09", "start": 9.27, "text": "for disaster. Hi, everyone, and welcome back to Stephan Livera podcast. Joining me on the show today is the CEO of Arch Lending, Dhruv Patel. Dhruv, welcome to the show." }, { "speaker": "stephan", "time": "00:20", "start": 19.5, "text": "Thanks for having me, Stephan." }, { "speaker": "stephan_livera", "time": "00:21", "start": 21.24, "text": "So, there's a lot of interest recently in Bitcoin lending, and of course, there's been a big drop in the price recently, so we've got to get your, reaction on that also. So as we record this, the price is sixty-six thousand dollars ish per Bitcoin, and, you know, there's a lot of people who are sort of like, \"Is this a mid-cycle drop? Are we in a bear market fully fledged? Kind of where are we at?\" And, yeah, maybe give us a bit of your thoughts on that to start" }, { "speaker": "stephan", "time": "00:46", "start": 46.23, "text": "Yeah, you know, it's, it seems like we can't catch a break with, with price action. It's, ever since maybe last August, September, it's mostly just been choppy and trending downwards. I don't have a, a, a, a crystal ball here, so I'm not gonna opine on, on where we are in the cycle or, or maybe when it, it starts to turn around. But I will say, at least from, from recent, like the last few days and, and what I've been reading online with, with certain o-of where we are, and so hopefully, it's only up from here." }, { "speaker": "stephan_livera", "time": "01:21", "start": 81.49, "text": "Yeah, let's see how. so speaking of lending, let's talk a bit about the platform. So how has it impacted you in terms of, you know, customers and like liquidations or maybe that many customers having to load more collateral in, this kind of thing?" }, { "speaker": "stephan", "time": "01:36", "start": 96.06, "text": "Yeah, absolutely. So, so maybe I can just step back and, and, you know, I, I know many of your listeners probably already know what a Bitcoin back loan is, but I can, I can So typically you borrow, a certain LTV against your Bitcoin, and so we offer up to sixty percent. And, and what happens is there's two things, like as the price of Bitcoin rises, you can either get some of your collateral back or increase your loan size, and as the price of Bitcoin drops, you either, need to top up more collateral in a margin call or you, have the risk of liquidation. And so when we see price drops like what we've seen over the last two weeks and, and, and more, sort of over a longer period of time over the last six months, both of those outcomes have, have occurred where we have margin calls happening and so clients need to go and, and add additional Bitcoin to keep their loan safe, but also when you see drops from like the peak of a hundred twenty-something K to the low of fifty-nine thousand dollars, you eventually see some clients, not have additional Bitcoin to top up and as a result, there do need to be some liquidations just to keep the, the loan book in healthy state." }, { "speaker": "stephan_livera", "time": "02:45", "start": 165.23, "text": "Gotcha. Yeah. So let, let's, yeah, give, maybe just back up a little and give us a bit of an overview, like when did Arch start and what are the main products that you guys offer?" }, { "speaker": "stephan", "time": "02:55", "start": 174.9, "text": "Yeah, so I'd say Arch started in February of twenty twenty-two, and so, you know, that, that was a volatile year just with the end of the, at the end of the year, there were, there was many firms that were going bankrupt, in this space and in, in the Bitcoin space broadly, but For us, the-- our core product has always been Bitcoin-backed loans, and as I mentioned, it's, like I just a flexible product that functions as a line of credit, allows Bitcoiners to access liquidity to do their, wha-whatever they need to in their life, whether it's make investments, handle expenses, things of that sort, without selling their Bitcoin. and then what we've done is that's sort of been a great foundation layer product, and we've built tailored, customized use cases on top of it. So one of them is what we call--" }, { "speaker": "stephan_livera", "time": "03:39", "start": 219.11, "text": "Gotcha. We're gonna go into the customized stuff. Can we just sort of get the overarching, like, what's the interest rate, what's the loan term you guys offer? Yeah. you know, just some of those kind of high level things that everyone would wanna know." }, { "speaker": "stephan", "time": "03:52", "start": 231.54, "text": "Yeah, absolutely. So, maybe I'll talk in terms of APRs because our loans have an interest rate and then a one and a half origination fee, and the interest rate, varies based on the loan size, but it starts as low as eight point four nine percent APR, and then the highest Rates are, are consistently coming down just as we continue to scale, and we offer one year loans that are interest only, and at the end of the, the term, clients can just roll over into another year loan. And so you don't actually need to go and pay off the principal at the end of the year, you can continue just paying your monthly interest and doing that for an extended period of time." }, { "speaker": "stephan_livera", "time": "04:30", "start": 269.98, "text": "Gotcha. And the customers, like, is it American customers? Is it global? Is it non-sanctioned jurisdictions? What's the-- who is a potential customer for you?" }, { "speaker": "stephan", "time": "04:40", "start": 280.21, "text": "Yep. So, so we're licensed and regulated in the US, so we service, primarily US-based individuals and businesses, but we also support individuals in certain international jurisdictions, as well as businesses, more broadly globally as well." }, { "speaker": "stephan_livera", "time": "04:55", "start": 294.51, "text": "Okay, so mainly US, but you can support, you know, businesses overseas, kind of thing. Yeah," }, { "speaker": "stephan", "time": "05:00", "start": 300.24, "text": "business, businesses, overseas, we definitely don't touch like sanctioned regions and things of that sort, and we have a full KYC/KYB process that needs to happen regardless of, of the jurisdiction, and so yeah." }, { "speaker": "stephan_livera", "time": "05:12", "start": 311.97, "text": "Gotcha, yeah. and then, yeah, maybe just talk to us a little bit about the LTV levels as well. So you mentioned sixty percent LTV, so talk to us a bit about that." }, { "speaker": "stephan", "time": "05:21", "start": 320.93, "text": "Yeah, so essentially there's probably four numbers you need to be aware of here. One is like, what's the maximum initial loan to value you could borrow? And so for us, that's sixty percent. Now, the other three are, okay, at what percent LTV, if Bitcoin rises, do I get to either increase my loan size or access some of my Bitcoin back And then the, the remaining two are in the situation where Bitcoin is falling. At what LTV is there a margin call? And for us, that's seventy percent. At, at that point, the clients have twenty-four hours to deposit additional Bitcoin collateral to bring their loan-to-value back down to sixty percent or lower. And if they're not able to do that, or if the price of Bitcoin continues to fall and hits the liquidation threshold, which is eighty percent loan-to-value, then we will need to partially liquidate to bring the loan-to-value back to sixty percent. We never sell all of the collateral, only what's necessary to bring it back down to a healthy level." }, { "speaker": "stephan_livera", "time": "06:19", "start": 379.15, "text": "Yeah, let's talk a little bit of the customization aspects you mentioned earlier." }, { "speaker": "stephan", "time": "06:23", "start": 382.93, "text": "Yeah, so I, I think, you know, the Bitcoin backed loans is a powerful tool, but what we realized is, people have certain use cases and mine, so it's easier to build tailored products for those use cases. And so we have two specifically, that are live right now, and we're always working on launching additional ones for, further tailored use cases. One is called Perpetual Income. You can think of this at, like, the, the target use cases may be folks that are retired or have, a higher amount of Bitcoin. But Don't have a W-2 or a traditional cash flow stream. Here, what it is, it's a managed product behind the hood where you deposit, say, ten Bitcoin, and you can comfortably access fifty thousand dollars against that every year in the form of a loan, and so it's tax-free income for you. And the way it's done is you start with a very conservative loan-to-value that you can continually increase over time, and Bitcoin's appreciation should outpace the level of growth on the debt that you're taking on as well. So, so that's one. And then the second is a called Tax Shield. And so this is geared towards high income earners where they're able to borrow against their Bitcoin and invest in mining equipment, and because of the changes in the, the tax bill, this is now counted as something that you can bonus depreciate against your taxable income, and as a result, reduce your tax bill, at the end of the year. And so for us, those are two that we have right now that are specialized lending use cases for, for certain Sets of individuals, and we'll continue to build out more of these as we go forward." }, { "speaker": "stephan_livera", "time": "07:58", "start": 477.51, "text": "Gotcha. Okay, so as I'm understanding that, the first one, the perpetual income is kind of like if you wanna live off your stack, let's say, yep, this, this, if you're like a higher net worth Bitcoiner and you wanna kind of borrow against a smaller fraction of your stack and, you know, live off that. and of course, you know, Bitcoin's volatile, but the idea is generally if you're a Maxi, you believe Bitcoin is, you know Bitcoin is higher than the interest that you're paying is kind of the general idea, and then the second category there you were saying is the tax shield, so this is more like for Americans who wanna, let's say, take advantage of a specific tax deduction that's available, for mining, Bitcoin mining equipment, So tell us a little bit about the mining side of that. So is that like, do you partner with a mining hosted company for that, or is it like they will borrow and then they will go find their own mining partner to work with or, or go and do their own like mining setup?" }, { "speaker": "stephan", "time": "08:56", "start": 535.59, "text": "Yeah, so, so, so the clients are Free to do as they wish there. We have partnered with Blockware, so, you know, we, we can certainly, make an interruption for clients there, but also clients can go and, you know, do mining themselves or with any other provider they see fit. So it's flexible from that respect." }, { "speaker": "stephan_livera", "time": "09:14", "start": 553.72, "text": "Gotcha, yeah. Okay, so these are the custom i-aspects of it. And then, you know, just given kind of the price drops and, you know, some of what we were touching on, I guess it'd probably good-- be good to just chat a little bit about That, like, who should actually do this, right? Because I guess it is, like, yes, there is that logic of, okay, Bitcoin CAGA is, you know, whatever we think it's, it's gonna be. Like, I look at, let's say, PowerLaw or whatever, What, for what person is it the right thing to do, and for what people is it not the right thing to do, because maybe they don't have a, you know, a big enough net worth to kind of sustainably do this in a You know, in a managing, in a risk managed fashion rather than like a YOLO fashion." }, { "speaker": "stephan", "time": "09:58", "start": 597.64, "text": "Yeah, yeah, absolutely. So I, I think like maybe we'll, we'll separate it out into two use cases. Like, there's definitely the use case of, of people that are doing it more in the YOLO fashion, right? And they're maybe borrowing against their Bitcoin to buy more Bitcoin, and, and for them that's like a leveraged use case. So that, that, them aside, I think for the rest of the folks, we support loans as" }, { "speaker": "stephan", "time": "10:21", "start": 621.26, "text": "And what I see consistently, and I, I think I would recommend, is essentially making sure you're in a position knowing that while we all expect like Bitcoin's long-term kager and appreciation to well, outpace any sort of like APR interest rate on, on a given loan, you need to account for any sort of volatility that comes up in the, the interim. And so what, what I'd recommend is essentially not using all of your, your stack to borrow against, like keep Maybe some portion aside for yourself, where, wherever you're cussing it, self-custody, et cetera, and an additional portion aside to handle margin calls should they come up. And so that way, if anything happens and the Bitcoin price fluctuates downwards over a period of time, your stack is safe, you're able to handle margin calls as they come up, and sleep better at night. the other way to do this also is when you take out a loan, maybe some of those proceeds you keep aside in cash so that way if there's a margin call, you partially pay down your loan. You know, there's two ways to cure the margin call. It's either paying down your loan partially or adding more Bitcoin. So whichever way you do it, just making sure you have contingency plans for what may happen if Bitcoin does sort of decrease in price." }, { "speaker": "stephan_livera", "time": "11:36", "start": 695.8, "text": "Yeah. I, I am curious that you, you have what might be considered a high LTV to start, like sixty percent LTV. I mean, you can, you can easily, you can kinda get wrecked more easily if, if there's like a prig-big drop. So I'm curious why the selection of sixty, is that because you're trying to expand the access, for this product, but at the trade-off of, you know, if customers are starting at sixty LTV, like you would've got wrecked if you didn't keep enough, you know, aside for like" }, { "speaker": "stephan", "time": "12:07", "start": 726.74, "text": "Hold on, that's an important clarification. We don't require you to start at sixty percent. That's just the maximum you can do. We have many clients that start at fifty percent, forty percent. It, it really depends on the client's risk profile, and that's something they all get to decide before they start the loan. And so for us, we offer up to sixty percent because that's where we feel, is the most sort of aggressive we can do without Compromising our own risk standards and, and what we feel comfortable with as a company, but every client is free to decide the level of, you know, borrowing that they wanna do from the start." }, { "speaker": "stephan_livera", "time": "12:43", "start": 762.68, "text": "Yeah, gotcha. And so, yeah, because I think that's kind of an interesting thing, like where this goes over time, because like anyone who's been around for a while knows, hey, Bitcoin has gone through these big drawdowns, like eighty percent drawdowns, seventy-five percent drawdowns, you know, even in the twenty-one cycle, there was like a, a mid-cycle drop from sixty K down to thirty K before going back up to sixty-nine K and then down to like, you know, sixteen K, the FTX kind of bottom, let's say. So, And like, obviously, yeah, obviously there's, there's, there's too many, there's no one size fits all here. I understand that there are some people in the space who have like a total like zero debt whatsoever mindset, there are others who are sort of, you know, you can do it conservatively, and then you've got like the full YOLO side of the spectrum as well. So, I, I have been in the more like, you need, you can do it, but you need to be conservative, and it kind of, it makes more sense I think these are the cases where this-- these individuals or businesses might have, let's say, cash flow and income, or they might have just a high net worth so they can sell some other asset to, you know, but, but the, the important point is You do need to kind of stress test, right? Because anyone doing this has to really like pull up a spreadsheet and like think about, okay, what if Bitcoin drops? What if, you know, like basically, mainly it's what if Bitcoin drops? and of course, think about other risks like how is the provider doing their custody and like what's the risk on that side? Is there rehypothecation? So let's talk a little bit about some of those points as well. Like, talk, talk to us a little bit about the custody on your side and whether there's rehyp Some of these, concerns that people will typically have." }, { "speaker": "stephan", "time": "14:30", "start": 870.25, "text": "Yeah, absolutely. I, I mean, I think you validly pointed out the two things that, like, I think the two biggest things that, borrowers should be aware of is essentially like, how is your Bitcoin held and what's happening to it, if anything. Arch doesn't and has never rehypothecated client collateral, which means we don't touch it, we don't lend it out, it just sits in cold storage at Anchorage Digital, which is a federally chartered bank in the US," }, { "speaker": "stephan", "time": "14:56", "start": 895.59, "text": "and one So that our client collateral simply just sits there. In fact, for loans above a hundred thousand dollars, clients can request that we segregate their collateral into its own wallet and share the wallet address with them, so clients can see it twenty-four seven and know that nothing else has come in or gone out of that wallet, which is a way for us to prove what we're seeing as well." }, { "speaker": "stephan_livera", "time": "15:16", "start": 916.04, "text": "I'm sure you're seeing this now as well that we're seeing, in the space there's different ways to do loans, right? So you have the kind of, you know, just straight custodial style loan, and then there are people doing things like multi-sig and DLT style and, you know, different ways of, approaching this loan. How are you seeing this landscape in terms of custodial style, you know, with a regulated custodian versus the multi-sig or DLT style?" }, { "speaker": "stephan", "time": "15:47", "start": 946.62, "text": "Yeah, so, m-maybe, you know, I'm not aware of like specific companies doing the, the DLC one, at least right now. I, I think, so, so I think it's" }, { "speaker": "stephan_livera", "time": "15:56", "start": 955.77, "text": "Lygos Finance, and I believe Lendersat might have mentioned some of this also. So that's, but that's kind of like a very specific, case, and I guess the argument would be, okay, instead of putting it into custody, you have self-custody, but it's with a DLC. Now, to be clear, there's a, there's a And there's, you know, there's certain elements, you know, it's a different security model, but just curious to get your thoughts on that, just to compare, let's say, the arch model contrasted with other styles." }, { "speaker": "stephan", "time": "16:26", "start": 986.47, "text": "Yeah. So, I, I think each style has its pros and cons, and maybe I'll, I'll just like start with the arch style and then go down towards the multisig and then lastly the DLC, and, and we can talk about this and, and feel free to, to chime in if you think I'm missing anything. But with Meaning that you're also trusting the custodian that they, they select, right? And so, for us, it's Anchorage, for other lenders, it may be other custodians as well. So that's, that's the layer of trust that's built in, as well as like the non-rehypothecation piece, right? The second is if you look at, multisig, there, in a, in, in a weird way, yes, multiple people have keys to the, to the, to the wallets and to the coin, and you hold You know, there's enough other holders of the keys that they can move your Bitcoin without your permission. And so yes, you have a key, but also in my mind, it's sort of like similar to custodial in that respect, meaning other entities control the ability to move your Bitcoin without you-- and, you know, you, you don't have the express permission to, block it or, or, or to enable it, and so with that respect, I find it similar, but also you have one of the keys, so that's like uniquely different Different than the custodial setup. In both of these situations, what you typically see these companies have, a legal agreement for a loan document and it's govern-- the, the terms of the loan are governed by that document, which outlines the loan amount, the LTV, the margin call, the liquidation, all of these sorts of terms. And then I think on the third piece, you have the DLT. The, the things to think through are like, okay, where are the oracles? How was this actually, it's similar to like a smart contract in some respect, Sort of, programmed and things of that sort, that are more of the, the risk vectors, as well as some-- you, you, you lose maybe some of the pieces that come with using, a multi-sig or a custodial solution, which is there's a team that you can contact, to maybe get some grace on a margin call window and things of that sort." }, { "speaker": "stephan_livera", "time": "18:36", "start": 1115.75, "text": "Yeah, so, yeah, I think we'll see, yeah, a-and I think to be fair, it is early for the DLC style, of loan, so we'll see exactly what happens there. I know Lava were doing that, but they've shifted now. so, yeah, those are a few things on that. in terms of the loan funding, like, are you doing fiat-wise? Are you doing stablecoins? What's the plan there?" }, { "speaker": "stephan", "time": "18:59", "start": 1138.78, "text": "Yeah, so, so we actually support both. we can do fiat directly into your bank" }, { "speaker": "stephan", "time": "19:05", "start": 1145.33, "text": "Is many of our clients actually have real world use cases, whether they're borrowing to maybe, you know, buy their first house or they're handling real world expenses that have come up, whether it's a medical bill, a tax bill, or just borrowing, you know, they've been sort of Bitcoin wealthy, if you will, cash constrained for a while, so borrowing to handle other life events that they want to, to make happen, whether it's buying a, a wedding ring or just like having that vacation, things of that sort. And so as a result, most of our disburseals We see are actually fiat into people's bank accounts." }, { "speaker": "stephan_livera", "time": "19:39", "start": 1179.05, "text": "Yeah, I see. also, I guess the other thing I'm, I'm starting to see some people talking about this, I'm curious to get your reaction on it also, which is some people are just borrowing against like iBit or against, you know, like what they're doing is they're going to like a brokerage and they've got like iBit shares and borrowing against that because they're getting a cheaper rate. What's your view on that?" }, { "speaker": "stephan", "time": "19:58", "start": 1198.44, "text": "Yeah, so I, I think essentially like rates will converge, a-across The, the reason there's a disparity of rates is essentially how capital pools flow into the space. Like all of the lenders here are essentially non-bank lenders, which means we don't have a set of deposits that we're able to, to lend out, and, and sort of arbitrage a lower rate. But as institutions get comfortable lending against iBit, I think the next natural step is, okay, we've basically already lend against like the ETF, lending against spot is no different. a-and so as a result, you'll see banks and other, like maybe the pensions, the insurance funds that oft-often have the lowest cost of capital, start to provide capital to companies like us and say, \"Hey, look, like this is the same risk profile as, lending against iBit, which we-- which we are comfortable with.\" and so as a result, you'll And, and, and sort of the convergence of the two. Yeah, I see. Which, which they have, to be fair, Stephan, like when we started four years ago, rates were like APRs were sixteen percent. Now, at the most competitive sizes, you're talking eight and a half percent. So we've seen a good, you know, sort of Shrinkage in the, the interest rate already over a shorter period of time." }, { "speaker": "stephan_livera", "time": "21:13", "start": 1273.24, "text": "Yeah, and while, while we're here, we're talking, because obviously this is a two-sided market, right? On one side, you've got the lending side of the house, and then you've also got the capital provider, yeah, yeah, sorry, I guess you can say you've got the borrower side of the house and the lender side of the house, the capital provider. So on your side, you're going out to source funds that you can then lend out to your, borrowing customers Conversation been like with, on your capital provider side, in terms of getting them comfortable with this model?" }, { "speaker": "stephan", "time": "21:45", "start": 1304.98, "text": "Yeah, so I think we've been lucky to find a group of partners, Galaxy Digital is one that, you know, is, is very public and, a supporter of ours on the debt side. We've raised a CLO structure, which is a more traditional financial structure where in debt investors can sort of add capital to this structure that we're able to draw down on to fund our loans, and it sort of all ensures there's no rehypothecation At all. for us, I think the conversations have just gotten easier over time, where I think it's a function of two things, Arch's scale has continued to increase, but second, more and more investors, on the private credit side or, or even like on the, on the, in the debt world, are getting comfortable with Bitcoin as an asset class. The ETF certainly helps, and so I think these conversate-- you, you have maturity across custodians, all of these sort of things help these conversations, and I think, it's just a matter of time We start to see some of the largest banks and, and pools of capital enter this space and, and, and really become comfortable with Bitcoin back loans." }, { "speaker": "stephan_livera", "time": "22:46", "start": 1366.06, "text": "Yeah, especially with the, you know, I can imagine if you started in twenty twenty-two, that was when like everything was blowing up and Genesis and Celsius and BlockFi and all these things were breaking down at that point. there's also been a lot of, let's say, focus on security and these aspects, you know, just over these years, there's been a lot of conversation around things like, you know Proof of reserves or some kind of proof of liabilities report and other audits and SOC 2 and things like that. Do you have anything else on that side that you're looking at, like proof of reserves?" }, { "speaker": "stephan", "time": "23:18", "start": 1397.54, "text": "Yeah, so we are looking at that. we're, we're a financially audited company, like we go through like penetration testing and things of that sort on the engineering side as well. And then the one piece I mentioned, which we also do, is for loans above a certain size, which is a hundred thousand dollars, we just segregate their assets, and that's like a real-time proof of reserves for a specific client saying, \"Hey, look, this is your wallet address for your Bitcoin, you know nothing else will come in or out, but we will be doing a more holistic proof of reserves as well, this coming year.\"" }, { "speaker": "stephan_livera", "time": "23:47", "start": 1426.58, "text": "Yeah, so it's interesting to see how the space is evolving. Now, the other aspect that is interesting, now, yes, of course, we can talk about self-custody and security and DLC model and multisig model and custodial model, but the other aspect of it is just kind of a UX thing, right? Like certain providers, I guess, Gonna try to vertically integrate. So they're gonna, like, as an example, like a strike in the US or, probably some others in, in Europe and things, where they are trying to offer you, like, you can have a loan, but also a card that you can spend out, like, directly out of that. how are you sort of comparing and seeing that? Do you see that that's more like a, a, a retail or individual product and maybe not as useful for the companies or, like offering some of these other financial services around that? So I I guess the point is, some customers want an all-in-one, one-stop shop." }, { "speaker": "stephan", "time": "24:39", "start": 1478.52, "text": "Yep, yep. A-and I think that's, that's on our roadmap as well. We'll pretty soon have the ability to buy and sell Bitcoin as well as some of these other functionalities that you mentioned, a card, et cetera. As I think through, you know, who the demographic for that is, it depends on the product, right? Whether you're talking about buy and sell, Bitcoin, I think that's broadly applicable to whether you're an individual," }, { "speaker": "stephan", "time": "25:01", "start": 1501.34, "text": "Some of the other use cases, maybe like a debit or a credit card, are more tailored towards your individual and high net worth audience as opposed to less relevant for, for businesses, although, I think it, it, it could be relevant across the spectrum still as well, just a different type of business. Maybe it's your small and medium businesses that are still independently owned and, or, or maybe like owned by a single family or a single like shareholder. but yeah, roughly Arch will also be launching these additional products to, be- Become a more holistic financial services provider for Bitcoiners." }, { "speaker": "stephan_livera", "time": "25:35", "start": 1535.28, "text": "Yeah. and so I'm curious, like, what kind of growth you've seen? I don't know if you, like, some pla-- some, companies will actually disclose, like, say, \"Hey, this is the size of our loan book.\" Are you able to say that or no, or maybe give us a sense of, like, the growth you've seen?" }, { "speaker": "stephan", "time": "25:50", "start": 1550.01, "text": "Yeah. So I, I think, you know, we started in February twenty twenty-two, we, we actually disclosed our numbers as part of Galaxy puts out And just how different companies are doing, not all companies opt in, but, but we're fairly transparent with that respect. And so I would say last year we did around four hundred billion dollars of originations, of these types of loans, and, the loan book size at the end of this year was in the, in the nine figure range. And so I think for us We're just continuing to, to scale and build off of that momentum." }, { "speaker": "stephan_livera", "time": "26:25", "start": 1585.14, "text": "Yeah, so I mean, it's, it's a big business, and I think this is, definitely what I'm seeing when I talk to people in the industry, whether they're like lending and, you know, in their, if they're involved in this aspect of it, so- Do you see like, where do you see the next kind of angle for growth? Is it just, you know, as NGU, there's new bitcoiners who come in and think, \"Hey, I wanna borrow against my stack,\" or like, where do you see the main kind of growth, side here?" }, { "speaker": "stephan", "time": "26:52", "start": 1611.63, "text": "Yeah, I, I think it's twofold. I think the, the market for Bitcoin back loans continues to expand with, with two, two sort of tailwinds here. One is appreciation of Bitcoin and, and sort of like the market cap of Bitcoin continuing to I think both of those are tailwinds for Bitcoin-backed lending broadly. If you look at-- I, I can't recall the, the specific numbers here, but if you look at the borrow percentage of, you know, what people hold on, on Bitcoin and the rate that they're borrowing against with respect to any other asset class, whether it's gold, whether it's stocks, et cetera, for Bitcoin, we're still only a fraction of all the other asset classes. So I think there's a long way for us to grow there. And I think second, specifically for Building out additional financial products, whether it's more structured products that are tailored lending use cases for individuals to meet them at their needs, or it's, you know, being able to buy and sell at some of the lowest rates on the market, the debit card, credit card, things of that sort." }, { "speaker": "stephan_livera", "time": "27:52", "start": 1672.24, "text": "Yeah, there's a little bit of a convergence there that like usually once people are doing maybe one or two of these products, then it sort of makes sense for them to start trying to expand and doing the other products also because it's sort of like you wanna ideally have customers for all of what they're doing in the ideal case. So, yeah, I guess just overall, like, there, there'll be some people who just think, \"No, just stay humble, stack Satoshis, don't do any debt stuff,\" and other people who think, \"No, like, use debt.\" Yeah. You know, w- how, where do you come down on that? Like, who does it make sense for and who shouldn't use this kind of thing? Yeah," }, { "speaker": "stephan", "time": "28:25", "start": 1704.64, "text": "y-you know, the, the question you asked is like just a question that has always sparked debate, even outside of Bitcoin, right? Like, people talk about Plus only when you have the cash ready, et cetera. where, where I roughly land is I think, debt can be a very powerful tool to build wealth, but, you know, you have to be aware of all the sort of like risks and considerations that come with it. And so Leveraging yourself to the max and borrowing against all of your, your stack and not having any sort of contingency plan for what would happen if the price decreases, I think is, is a recipe for disaster. What, what I would recommend doing is sort of borrow moderately, against your Bitcoin only for the needs that you have. You know, there, there's no need to borrow just to, Have, have extra cash lying around or, or maybe, for other use cases, make sure that the needs you have, are important for you. You borrow against your stack modestly, and I think that should give you enough breathing room to sustain through various cycles." }, { "speaker": "stephan_livera", "time": "29:34", "start": 1773.95, "text": "Yeah. And so, I guess you started in '22, users who started with you back in those days, they've seen, you know, even now at sixty-six thousand, they've seen a significant rise. What do you see? Like, do you see some of the customers are typically- Like closing it out once the price has gotten higher or they just sort of keep rolling it forward, rolling it forward. W-what's the sort of exit strategy there that you typically see for customers?" }, { "speaker": "stephan", "time": "29:59", "start": 1799.18, "text": "Yeah, I think it depends on the specific client, right? Some folks have a target in mind where they're like, \"Hey, at this point, at this price of Bitcoin, this is where I would like to sell a good portion of my stack.\" And it just sort of depends on their own entry base. What we've seen is we have clients that are now on year four of borrowing with continually roll it over, and these are the folks that are just very long-term holders, and, and they're not looking to sell. Other folks, if they come into cash from other avenues, maybe they sold, a property that they had, et cetera, they're able to use those proceeds to pay off the loan, and just continue holding their Bitcoin. So I think it varies just depending on the specific client and what their situation is." }, { "speaker": "stephan_livera", "time": "30:41", "start": 1840.98, "text": "Yeah, interesting. And so as you mentioned, that so there are customers who are able to just fully live off their Bitcoin and just kind of, quote unquote, perpetually keep the loan, because obviously they're kind of relying on this idea of, hey, Bitcoin's cargo goes up faster than the, interest rate. And so in theory, like as long as you manage your LTVs and everything correctly and conservatively, over time your collateral stack You know, just grows faster than the loan, even though you're borrowing a new amount every year to live off it." }, { "speaker": "stephan", "time": "31:14", "start": 1873.67, "text": "Absolutely, absolutely. It's just like the kagura of Bitcoin outpaces, you know, the growth of your debt with the interest." }, { "speaker": "stephan_livera", "time": "31:20", "start": 1880.24, "text": "Yeah, so I guess this is one of those things where people really have to kind of do the numbers, like pull up a spreadsheet and like crunch out some numbers on like what you think the worst case would be and what is your contingency as well, because I think that's kind of, you know, do you have other assets? Do you have income? Do you have like some cash that you can use to pay down some of the loan? These kinds of things, because I guess in, you know, some of these things they can sound easier in theory than it is, like when it really happens to you and you've gone through, let's say, a fifty percent drawdown, just as we, you know, we did, like at the, from the top at one twenty-six K recently down to, call it sixty K or whatever it was, you know, fifty percent drawdown. so I think, I think it's just, it speaks to making sure you have conservative, Ratios in terms of like having a low LTV so that you're in a safe zone." }, { "speaker": "stephan", "time": "32:11", "start": 1931.43, "text": "Yeah, I, I think what you said is right, right? It's easier for, i-it's hard for people to sometimes to think through, a scenario like this, but now that we've actually gone through it, you know, many people thought, okay, look, the, some of these drawdowns are done with the ETFs and more institutional capital coming into the space, so we might not see such heightened volatility to the downside, but now obviously we've seen it over Very fresh in a lot of people's minds and something that they're now able to actually plan for because it's very real that they just experienced this." }, { "speaker": "stephan_livera", "time": "32:45", "start": 1964.84, "text": "Yeah. So, any other thoughts on where things are going, with- I guess, like, even like TradFi banks, are they gonna start offering a similar product? and then what happens then? Like, is it more like you will end up competing with them or like white labeling with some of those services or maybe they buy you out or you become a bank?" }, { "speaker": "stephan", "time": "33:05", "start": 1985.23, "text": "Yeah, yeah. So I, I, I think like it's a mix of all the above, right? if you, if you look at it traditionally, there, there's a few ways I see banks entering this space, and I, I think they will. One is like they Other such companies and say, \"Look, like, I don't want to be in the business of sort of managing hundreds of, of thousands of loans, on a twenty-four seven basis just because Bitcoin is, is, you know, twenty-four seven with margin calling and all of these sorts of situations. It's easier for them to say, \"Arch, here's a billion dollars, go manage a Bitcoin-backed loans book,\" and, and that's an easy way for the banks to function. The second is white label, you know, which, which sort of we've Unions, things of that sort. and the third is, you know, some banks will elect to build this in-house, and I think this market is, is large enough that multiple players will have a successful product and, a fair amount of users, but it's a little early to see how exactly it'll play out from that side." }, { "speaker": "stephan_livera", "time": "34:07", "start": 2046.66, "text": "Yeah, okay. any other, I guess, thoughts on where things are going? Any predictions on, the Bitcoin lending market?" }, { "speaker": "stephan", "time": "34:13", "start": 2053.36, "text": "you know, I, I think my, my rough prediction is like even through the We've been seeing education and awareness of this product continues to grow, and as we start to see the cycle turn around, as we start to see price appreciation, increase adoption, the market size for Bitcoin-backed lending will just continue to scale." }, { "speaker": "stephan_livera", "time": "34:34", "start": 2074.46, "text": "Yeah, so I think it's, an interesting space, but certainly a place with risks. I, I just want-- I can't reiterate that enough for listeners that, this isn't the thing to just go and YOLO on it. of course, you've just seen a big drawdown, but it's probably, right now, it's probably more cent-- top of everyone's mind because we've just gone through a fifty percent drawdown, let's say, whereas maybe the time-- ironically, it might be sort of like, I mean, Stuff like when it's kind of lower, they sort of see that upside more, whereas like maybe during that kind of hype time, people are kind of euphoric and they're feeling like, \"Oh, number is only gonna go up,\" and then maybe that's where people get into more risk because they haven't thought enough about their LTV and, you know, their contingency plans." }, { "speaker": "stephan", "time": "35:22", "start": 2121.73, "text": "Absolutely. You know, this isn't advice, but I feel like right now is probably a safer time to borrow, or like to enter a loan than, than, than previously, just because we've already seen It could go lower from here, but I, I feel like odds are, we're, we're near a bottom, and so the, the chances of a, a margin call or a liquidation threshold being hit if you start borrowing now is much lower, than, than previously." }, { "speaker": "stephan_livera", "time": "35:49", "start": 2148.74, "text": "Yeah, so, but, yeah, as always, listeners, you're big boys and big girls, so make sure you do your analysis. Himanshu, where can- Oh, sorry. Dhruv, where can people, find you online?" }, { "speaker": "stephan", "time": "35:59", "start": 2158.93, "text": "Yeah, so, I, I think the best way is if you could just go to archloanding dot com and there is a chat button, you can book a video call with someone from the team. I'm on, Twitter quite frequently as well as our Dhruv Patel, underscore thirty four. And so I think those are, are roughly the best places for us to, to be in contact." }, { "speaker": "stephan_livera", "time": "36:26", "start": 2185.71, "text": "Excellent. Well, thanks for joining me, Dhruv." }, { "speaker": "stephan", "time": "36:28", "start": 2187.86, "text": "Awesome, thanks for having me, Stephan." } ] }