Why Newmarket Capital CEO Andrew Hohns is fusing loans with bitcoin

continue um crypto conversation price of Bitcoin this morning it got very close to 100,000 join us now Andrew hones New Market Capital founder and CEO and today New Market is announcing battery Finance it's a Bitcoin focused Asset Management platform that combines uh cryptocurrency uh and other assets I won't say real assets because that sounds funny doesn't it it's like uh you know something other than Bitcoin like a real asset I'm not tangible let's call let's call it uh tangible and the first you you've got to explain this to us um the first time you're combining

Bitcoin to actually make maybe loans which why don't you explain it because it it takes some of the the problem that you normally have with lending which is inflation I guess and it could actually lessen the risk and volatility for fiduciaries running pension plans yeah hard believe Bitcoin could be a solution to pension uh fund management that's what we're thinking well good morning Joe Becky Andrew I'm so pleased to be here and I'm really excited to announce today on squawkbox this loan that we've just completed uh we combined uh a seasoned multif family asset in

Philadelphia about 50 meters away from the First Bank of the United States the one that Alexander Hamilton started we combine that asset with around 20 Bitcoin and we provided a loan to refinance the existing mortgage on the property to provide the asset sponsor uh some funding for Capital Improvements and with the remainder to buy the 20 Bitcoin okay we got to go backwards go ahead we got to go backwards we're just going to slow the whole thing down so everybody understands what happened okay so there's a property y physical property multi mul 63 unit it's

a multi family property the sponsor the effectively the owner of that property yep needs a loan that's right okay they to you that's right okay you say We'll provide you the loan in the form of a loan a classic loan that's right okay so you're going to give them cash that's right term financing term financing for and how long's the loan just 10 years 10 10 year loan okay that's right above market rate or below or what's no market rate interest R I'm just trying to slow the whole thing okay now let's introduce the Bitcoin

piece into it that's right so no no explain how the Bitcoin piece and relates so the loan has been provided the use of proceeds is to pay off the existing financing so the use of the proceeds of the loan of the loan is to retire the existing mortgage right so there an old old mortgage they're going to pay the old mortgage off that's been paid off okay now they have a little bit extra money to make some improvements in the property right so a little bit extra cash so your the the amount of money you've

lent pays off the old loan that's right it's also has you have a little bit of extra to to fix the property fix stuff up yep and then with the remainder which is a little bit more a little extra and that instead of cash out Bitcoin in and we use it to purchase some Bitcoin and add it to the collateral package of the loan so now our loan is supported by both the traditional asset the 63 unit apartment building and the Bitcoin okay so you the loan was maybe $2 million more so that's how you

get the Bitcoin out ex exactly right so it's on the assumption that the Bitcoin is going to rise faster and that will become an asset this over the life of the loan for sure so we think on the downside this provides us with much better protection compared to a traditional lender because a traditional lender if something goes wrong they have to recover against that particular building which is idiosyncratic risk something might happen with the maintenance or what that also requires conviction on your end that Bitcoin is not a volatile asset asset over time over time

over time and that is either going to go up or at least stay where it is well that's by by fusing the Bitcoin with credit and by fusing it with traditionally financeable assets it gives us the luxury of expressing that medium-term view on bitcoin and that's what's key it's volatile in the short run you know I mean minute by minute today who knows it could cross 100,000 that would be exciting how long's the loan 10 years years and the minimum hold period for the Bitcoin is four years so what we say to the borrower is

we say look you can repay the loan at any time for any reason with no penalty which is a really valuable feature compared to a traditional loan yeah that's like a home morage like a home mortgage almost that's very unusual for commercial financing but what we do say is that to the extent that the loan is repaid at year four or earlier the minimum will release the property but the minimum length of time that the Bitcoin has to stay in escrow is four years Andrew get go go on to because I don't know how it's

time but I'm I'm fascinated about there is a problem for state and Municipal and municipalities in terms of that the asset liability mix somehow you think that using Bitcoin that you can lower that risk and and increase returns and narrow the Gap how does that work for pensions well if you think about it Joe uh the average exposure to fixed income at us pensions is around 25 to 30% okay and many of them have an asset liability funding mismatch of around 25% as well they a big shortfall that's going to be a big burden on

taxpayers and a real problem we talked about this so much how how to solve it now what they've been doing in credit is reaching for risk going for super high yields leverage Niche strategies and I think that it's time to Pivot away from those toward high quality credit where the return per unit of risk is extremely attractive but the returns are not as high how do you compensate for that you fuse the credit with Bitcoin and you utilize the credit to express a medium to long-term duration because yes if you have the Bitcoin for one

day one week it's extremely volatile but for four years fouryear hold period period the worst ever return has been just over 23% the fifth percentile 30% the 50th percentile 91% so if you take a small amount of Bitcoin and you add it to a large amount of high quality Credit in novel Lending Solutions novel structure credit pairings what you can accomplish from an asset allocation in an overall portfolio strategy perspective is incredible it can actually be a Cornerstone to close the asset liability Gap at pensions m