Introducing B2X.
At Ledn, our mission is to help people save and hodl more bitcoin by providing unique and innovative products and services. To deliver on our mission, we are proud to release a new product for bitcoin hodlers — B2X.
Many of our users use our bitcoin-backed loans to purchase additional bitcoin. This process takes several steps, transactions and time. B2X now allows users to instantly double their bitcoin holdings in one simple step.
In this piece, we will cover:
1. How it works
2. The benefits of using B2X vs. using margin on an exchange
3. How it provides significant tax benefits for its users
1. How it works:
B2X allows users to double the current amount of bitcoin they own through a Ledn bitcoin-backed loan and the simultaneous purchase of an equal amount of bitcoin to what was deposited by the user. To better understand how the B2X process works, let’s go through an example where a hypothetical person, Steve, uses B2X:
Steve already owns 1 bitcoin and would like to try the B2X service.
Once he is registered (process takes less than 2 minutes) and verified (Ledn always get back to users same-day), Steve deposits 1 bitcoin valued at $10,000 dollars into his Ledn Savings account.
Steve places a B2X order with Ledn. Behind the scenes, Ledn approves a loan of $10,000 and immediately purchases 1 more bitcoin for Steve.
At the end of the process, Steve will have 2 bitcoins and an outstanding loan of $10,000.
What are the details on the loan?
B2X loans have the same rate structure as Ledn’s bitcoin-backed loans:
- Term is 12 months
- Loan can be repaid at anytime
- Interest rate is 1% per month (or 12% annualized simple interest) and the administrative fee is 2%.
What happens next?
Scenario 1: If bitcoin price rises by 20% to $12,000 within 1 month of starting the B2X loan:
Steve’s 2 bitcoin are now worth $24,000.
2 Bitcoin * $12,000 = $24,000
Steve’s loan balance including the accumulated interest and administration fee will be $10,300
[(2% administration fee + 1% interest per month * 1 month)* 10,000] = $10,300
Steve’s Original Bitcoin Value: $10,000
Potential profit/(loss):
$24,000 — $10,300 — $10,000 = $3,700
If, for example, Steve had not used B2X and the same price movement occurred in that time frame, he would have made $2,000 ($12,000 — $10,000 = $2,000).
Scenario 2: If Bitcoin price drops by 20% to $8,000 within 1 month of starting the B2X loan:
Steve’s 2 bitcoin are now worth $16,000.
2 bitcoin * $8,000 = $16,000
Steve’s loan balance including the accumulated interest will be $10,300
[(2% administration fee + 1% interest per month * 1 month)* 10,000] = $10,300
Steve’s Original Bitcoin Value: $10,000
Potential profit/(loss):
$16,000 — $10,300 — $10,000 = ($4,300)
If, for example, Steve had not used B2X and the same price movement occurred in that time frame, he would have lost $2,000 ($10,000 — $8,000 = $2,000.
2. The benefits of using B2X vs. using margin in an exchange:
There are many benefits to using B2X vs. using margin trading in an exchange.
A. Cost-effective & flexible time-horizon:
Most exchanges charge interest to its users that borrow funds to buy additional bitcoin based on hourly rates. When these rates are annualized most range from 20% to 40% interest on borrowed dollars — and generally there are time restrictions on how long the funds can be used for.
Ledn’s B2X service has the same fee structure as its bitcoin-backed loans, with a rate of 1% per month and a 2% administration fee — for an annualized all-in rate of 14%. This is one of the most cost-effective options available globally and allows much more flexibility to users (no lock-in periods or early repayment fees).
B. Simple to use:
Placing an order in an exchange can be difficult and funding your account with fiat takes time and many steps. Many times the platforms are not intuitive as to how to select the right set-up for the order requiring more complex knowledge of trading terminology. At Ledn, our goal is to simplify this experience.
B2X offers a quick and intuitive process that can be completed in 2 simple steps. Selecting the amount you want to use and agreeing to the terms after reviewing. The platform shows the users all of the necessary information and fees for the transaction and completes the order immediately.
C. No price-slippage:
In addition to the complexity of placing margin orders on an exchange, to do so, users must generally select an “order type” which can lead to price slippage (if market order is selected) or potentially not having your order filled in a timely fashion, or at all (if a limit order is selected).
The B2X service shows the user one price that he or she can review and accept.
3. How it provides significant tax benefits for its users
B2X allows users to close the dollar loan amount outstanding and withdraw their bitcoin at any time. When you do a margin purchase in an exchange (in which you borrow dollars from them to purchase additional bitcoin), your only way to take profit from the position is to sell all of the bitcoin to close the loan. The sale of bitcoin to close the position can create a taxable event that must be reported by the user. Exchanges have no options for users to withdraw their bitcoin once it has been purchased with margin. This forces users to sell their bitcoin and report the taxable event.
B2X allows much more tax flexibility in that users can decide to pay down the dollar loan at any time, with no penalty, and have the bitcoin withdrawn to their personal address. Since the bitcoin does not need to be sold to close the loan, the user does not create a taxable event by closing the loan and withdrawing the bitcoin. One can decide to sell the bitcoin at an optimal time for tax efficiency.
Final words:
B2X offers many advantages to those users who want to purchase more bitcoin by making use of their existing bitcoin in one simple step. The process offers cost-effectiveness in borrowing rates, simplicity to use, price certainty for your purchase, and material tax benefits. Check it out today at https://ledn.io/b2x/ and feel free to send us your feedback at hello@ledn.io.
