Envestio – Update and Cryptomining projects at a closer look

Well, nearly a half year went by since my last post about Envestio . Who has read my previous posts (here and here), might remember that I am a bit critical towards the marketplace. The performance of the platform although left a positive impression. Installements were on time, so I should not lament. Exactly this is a point, which I still find weird: no lates (or did you have some?) or something, only business as usual? This just leads me to believe that not every installement is paid directly from the borrower. I can imagine a scenario where the borrowers have allowances (and for some projects you see them in the description), and the repayment is taken from the allowance. Important for me is, that we see new projects on the marketplace, not more tiers of existing projects (which is okay to have, but not exclusively). Most projects on the platform are not rateable for me as I have no clue about wooden pellets or fish ๐Ÿ˜‰ But recently there were projects I could proxy a bit.

Crypto Mining Projects

Firstly I try to explain for what crypto mining is needed, I am no expert in this field, so forgive me my superficial approach. Mining basically approves transaction within its network, at least with Ethereum. So if A send 1 ETH to B, this must be confirmed by the network, and this is what miners do. Some transactions together go into one block, and who finds the block, gets a reward in Ethereum. But this network can do more, there are apps on it (dapps = decentralized applications etc). So there really needs to be miners ๐Ÿ˜‰

During the past weeks there were two such projects added on the marketplace, with a volume well over 1 Million Euro. In the project description we can see that the borrower got an order to build a mining rig containing of GPU’s. At first I thought now way there are GPU’s costing 900 USD per piece, but GTX 1080ti GPU’s are that expensive, and there are others which cost double. Money for which you get a good laptop, but this may be comparing apples and oranges. The nice thing about mining is, that it is calculatable and therefor we know the profitability. I used whattomine.com to calculate the profit. I was very fair and assumed electricity costs of 0.05 USD per kilowatthour(KWh). If you mine Ethereum, then you make 61 cent net per day, so amortising one card has a duration of 1475 days. Not the best point to start I think. Surely there are more profitable tokens to mine, but with less market cap and less volume to trade, so price swings are normal. Furthermore these results are from one point in time. Usually the mining gets more difficult when more people start mining, which happens when prices are increasing. As long as the difficulty increases less then the price, everything is okay and profitability is better.

Whattomine.com with 0.05 USD power cost and using a GTX 1080ti GPU

There seem to be more efficient GPU’s to mine then the above mentionned one. Update 2nd June: Good news is that mining profitability increased during the past weeks, which leads to better returns. You can check it here if interested : https://bitinfocharts.com/comparison/ethereum-mining_profitability.html#6m

Conclusion

At the moment everything is fine in Envestioland, but I think one should really think twice before investing in mining. It really was glad to see that these projects filled in more time then others. So people are actually watching in where they invest in. Don’t get me wrong, basically I really like Envestio’s idea: Support companies and help the economy grow. This safes jobs and creates more. For investors it is great as well, fund a great cause and get high yields. But with high yields, normally comes high risk ๐Ÿ˜‰

New Investors get 0.5% Cashback (for the first 270 days) plus 5 Euro starting bonus, if you register through this link. There are not always projects available, so best strategy is to deposit some money and act quickly once you get a notification about a newly added project.

Update on Envestio – All good?

Since my last post about envestio some weeks have passed und last week the first repayment of a project was up. As with all interest repayments everything went as planned and I got my principal back on time. End of this week, the next capital repayment is on schedule. Let’s see if this will be on time as well. Frankly speaking I thought there would be some delays. with at least one project. To me it seems weird that there is not the slightest delay anywhere (pretty bizar that I would like to see delays..). Envestio replied my question why there is no single day delay with the argument that the borrowers pay slightly before the schedule we see in our dashboards… I was less then impressed with this answer as in my opinion it does not adress the source of my question. I draw the following conclusions: 1) The marketplace makes an outstanding job and has everything under control (although we should differentiate here as most problems will occur normaly between 6 and 18 months, and the loans are not live that long so far), or 2) I did not fully grasp the risks involved in these types of loans or I do not understand the business, or 3) The multiple tiers are used to generate liquidity. I will describe this point further below.

To be clear: I do not accuse the platform to be a fraud or something, for this I have no evidence (if you have, bring them to me) and it is too early to tell.. For me, it is just weird that everything seems to go very smoothly. For this reason I am thinking through some scenarios. I still believe in the old formula: Very high interest = very high risks.

Multiple tiers

It is obvious that the same companies frequently take more loans. These loans are marked with the different tier. Tier 6 means that the same borrower has 6 loans open. At the moment there is one borrower (container) with 9 live loans in the amount of EUR 650โ€™000 hat. Possible that every loan is secured by some sort of security coming with the loan, but I find this a bit special. One could suspect here that the new loans are just extensions for older tiers. As long as the loan volume stays the same, there is no big issue. If the volume raises over time, then I have questions. Seldom there are new borrowers, mostly I see new tiers from existing borrowers.

Possible strategies

To reduce my exposere I try to invest only in one tier by each borrower and I try to catch an early one. If I am confident, I take a second tier. Further I only invest in secured debt which gives me the instant selling option with 5 percent discount. There might be other loans (subordinated) which do not offer this feature in the future, but as of now I only saw secured debt loans. Moreover I only buy loan parts with a duration higher then 3 months. This for the reason that I can sell without a loss after 3 months (assuming 20%, makes roughly 5% after 3 months). At loan expiration I can only count on 90 percent minimal payback (if the platform can pay that). If I really redeem early is a different story, but I like to have options available. Another question is if the platform has enough liquidity to provide the 95% of capital needed for early sellers, if lots of investors choose to sell. Basically this is the same as if savers call their funds from the banks. Let’s hope that we do not come to this point. As said before, it is possible that my assessment is just wrong.

Something elseโ€ฆ

Withdrawals from the marketplace are free of charge, as long as they are higher then 5 Euro. For amounts below there is a handling charge of 2 Euro. Envestio needs to do that as lots of investors required small amounts daily and their bank is charging them for that.

For the end

Maybe I am too hard on Envestio, but I remain sceptical. I believe the marketplace earned a chance, I stay with the platform and hope for new loans. Interest rates of up to 22 percent support me with that ๐Ÿ˜‰ If you decide to give it a try, use this link for registration and you will get 0.5% cashback (plus 5 Euro one time bonus) on your investments for the first 9 months.

Envestio – my so far review (interest up to 22%)

First of all I want to offer my appologies to my english reading visitors. Normally I try to translate my posts from German into English within two days after the German post has been released. Lately, I really had a lot of things to attend, so my time was very limited. I hope the situation will get better in the next weeks and you get my posts translated shortly after the German ones are published. Here we go:

At the beginning of this year Envestio got my attention when a Latvian digital marketing agency introduced it to me. Their goal was for me to publish a post about the marketplace. I highlighted my concerns over the platform as I found the loan supply confusing (Real Estate in Spain, Cryptomining etc). Further I could not imagine that there really were projects paying 18% of interest to investors (including buyback). The cryptoloan paid far more then 20% if I remember correctly. In the end I had not enough trust to try the platform and review it at that time, even though all my questions were answered and they tried to be as transparent as possible. So I declined, but still watched Envestio, until in July I was confident enough to give it a try with some pocket money. Now I am able to give you an overview of my so far experiences.

Registration/Deposit/Withdrawal – Cashback included

If you are registering thorugh this link, you’ll get 0.5 percentcashback on your investmentsย  (plus one time 5 Euro Bonus) during the first 9 months. Cashback will be credited around the fifth every month, directly on your investment account.

Sign up is straight forward, confirm your email and you are in. Copy of your ID plus utility bill (or bank statement) is needed only before withdrawing. I suggest you do the verification in advance, so a withdrawal can be made any time. Somewhat special to me is that if you request a withdrawal you can fill out a blank form with your bank data, the data can be overwritten and is saved after each request. The first thing that came to mind was: What happens if I get hacked and all my money will be sent to another person. Envestio implemented a security mechanism for that, they double check withdrawals before processing. Only withdrawals will be processed if the beneficiare is the same person as the registered investor.

Minimal deposit amount is set to EUR 100, but you can invest from 1 Euro into each project. A little strange handling, huh? ๐Ÿ˜‰ But that did not stop me ๐Ÿ˜‰

Buyback guarantee/secondary market

Envestio does not (yet) provide a secondary market in the traditional sense, but they will rebuy your loan parts at a 5 percent discount rate. This means you’ll get EUR 9.50 back immediately for a EUR 10 loan part. This option is available until the maturity date is reached. If you do not sell your tranche and the loan defaults, you will get automatically 80 percent of your capital back. For the remaining 20% your got two options: 1) immediately take 10% and get 90 percent total. Or 2) you wait for the recovery process to happen and could get in the best case the rest back. I think this is just hypothetical, but it is your decision. Worst case you do not get anything out of recovery and have got back 80 percent. I asked if a loan can be prolonged if the maturity is reached and interest is paid monthly. Envestio would ask the investors if they would like that to happen, but generally they would like to send the loan into default and begin recovery proceedings. My impression is that the marketplace would not wait very long to get active with the recovery. They wrote that on their blog. But this is only my gut feeling. If this happens like that in reality is another, not yet tested, case.
So far, no loan was in default according to Envestio.

Envestio offers a 100 percent buyback guarantee on certain projects, if you invest a defined amount, like 10k for example. In such a case, please keep in mind that this guarantee comes from Envestio, so if Envestio defaults, to guarantee is not worth that much.

Securities

Each loan is secured as laid out in the project description. There are commercial pledges and owner personal guarantees. An owner guarantee is not much worth to me as mostly the owners money is already inside the company. Furthermore as the loans are mostly to small enterprises with low capitalization.

One can ask if these companies are really that desperate as they pay 20 percent (I just take this number for the ease of the example, although the loan would cost more like 25 percent when platform fees are included) interest. I think we have to differentiate here a bit, as most loans are maturing within 3 to 9 months. If a company pays 20 percent annual for 6 months, this makes 10 percent effectively. If a company needs that liquidity to purchase material or for working capital purposes, I guess 10 percent are feasible. If they can operate with a good margin, my guess is this is an alright situation. To be clear: I still think the loans are high risk, but I can understand the need for bridge finance in a business.

Envestio is online since 2017…

… as marketplace, but already operation since 2014 as a private fund, according to their website. I asked the management why they came public and deal with retail investors, and why did they not stick to sophisticated/whealthy people. Background of my question: to get 100k in funding, one sophisticated investor is sufficent, but to get the same amount from retail investors, you would need like several hundreds. What is the easier path? I guessed the first one, but Envestio thinks otherwise. They see a huge potential in crowdlending, plus it is scalable. Furthermore crowdlending is only one part of their services the will offer. Last but not least, the Envestio people think that offering nice interest rates to the crowd for bridge financing business is a win win situation for everyone and it supports the economy. I agree on that one. Oh, if a big hitter is reading this: The platform has always some special projects available for people wanting to invest 100k plus. Just register and get in contact with them.

My closing thoughts

To date all my interest payments came punctual, no delays (which makes me sceptical). As no loan has reached maturity yet, I cannot talk about defaults or recovery proceedings.

You may have read between the lines, I am torn between that this is a great investment but very very risky. On one hand I like the idea to provide liquidity to companies for growing their business, on the other hand I think this is as risky as it gets. Such high interest rates do not come without high risks. One should remind himself of that before investing. I often consult the magical investment triangle (liquidity, return, risk) to assess investments. We here have good liquidity (monthly interest plus partial buybackback option), stellar returns so this means risks must be high (appologies if I repeat myself, but my mind is swirling around the risk part). What can I say more, just remind yourself of the risks involved and do not invest more then you are able to lose.

Ok, this is it from for now, if you are interested in Envestio, use this link to register and get your cashback and 5 Euro starting Bonus. Maybe read this article before you invest, to make sure you got the risks in check.