BTC NOW WAREHOUSE FUND, LP
Limited Partner Investment Term Sheet - November 6th, 2025
TERM SHEET
BTC Now Warehouse Fund, LP
Date: November 6th, 2025 Type: Limited Partner Investment Investor Class: Subsequent LP (Non-Founding)
CONFIDENTIAL - FOR DISCUSSION PURPOSES ONLY
This term sheet outlines the principal terms for a Limited Partner investment in BTC Now Warehouse Fund, LP. This document does not constitute a binding agreement. Binding obligations will only arise upon execution of definitive legal documentation.
1. FUND OVERVIEW
| Term | Description |
|---|---|
| Fund Name | BTC Now Warehouse Fund, LP |
| Domicile | Delaware |
| Structure | Delaware Limited Partnership |
| General Partner | BTC Now Inc. (Delaware corporation) |
| Fund Type | GP/LP fund structure (not debt or equity) |
| Fund Term | Open-ended evergreen (hybrid: closed-end mechanics + limited redemption flexibility) |
| INVESTMENT THESIS & STRATEGY | |
| Fund Strategy | BTC Installment Purchase Plan origination and asset-backed securitization |
| Underlying Assets | 4-120 month installment plans with monthly payments |
| Purchase Plan Pricing | 15% effective APR across all term lengths (4-120 months) |
| FUND SIZING & PERFORMANCE | |
| Target Fund Size | $1B maximum capacity (USD or BTC accepted) |
| Launch Threshold | $25M minimum subscriptions to commence operations |
| Enrollment | Open window until $1B cap; soft close thereafter (existing LPs may increase commitments) |
| Expected LP Returns | 17.8% IRR Base Case (unleveraged) |
| FEE & COMPENSATION STRUCTURE | |
| Management Fee | 1.0% of NAV annually, payable quarterly in advance |
| Purchase Plan Origination Fee | 1.0% of funded purchase plan amounts at origination |
| Purchase Plan Servicing | 1.0% of outstanding balances |
| Performance Fee | 0% |
| Other Operating | 0.5% of NAV cap annually |
| Subscription Fee | 0% |
| Redemption Fee | 0% |
| LIQUIDITY & REDEMPTION | |
| Lockup Period | 24 months |
| Redemption | Quarterly FIFO as per cash availability |
| OPERATIONAL INFRASTRUCTURE | |
| Fund Administrator | Alter Domus (in negotiation) |
| Custody | Fireblocks, Coinbase for crypto; Citi Bank for fiat |
| Legal & Compliance | Stinson LLP |
| Audit | Big 4 auditor |
| CAPITAL STRUCTURE & RISK | |
| Leverage Strategy | Unleveraged (by design for risk management) |
Investment Strategy
The Fund operates as a warehouse facility acquiring Bitcoin for BTC Installment Purchase Plan origination, holding purchase plans during minimum 10-month seasoning periods, and selling asset-backed securities to institutional investors. The warehouse maintains a revolving capital structure supporting sequential tranche deployment.
Purchase Plan Structure:
- Monthly Installments: Each purchase plan structured with monthly payments ranging from $50 to $10,000 per month
- Term Length: 4-120 month installment periods
- Customer Diversification: No single customer may have aggregate monthly payment obligations exceeding $10,000 across all active purchase plans
- Concentration Risk Mitigation: Small, granular purchase plan sizes enable:
- High diversification across thousands of customers
- Reduced single-customer default impact
- Enhanced securitization appeal for institutional bond investors
- Simplified credit modeling with homogeneous pool characteristics
Structure: Installment Purchase Agreement
Customers purchase Bitcoin at 15% effective APR across all term lengths (4-120 months). Upon default, Fund retains all installment payments made PLUS Bitcoin collateral.
Recovery Example: $100K Bitcoin purchase, default after 36 months, BTC down 20%
| Recovery Source | Amount | Notes |
|---|---|---|
| Installments Retained | $57,600 | 36 months × $1,600 |
| Bitcoin Collateral | $80,000 | $100K × 0.80 liquidated |
| Total Recovery | $137,600 | 37.6% profit on default |
Breakeven: Fund profitable on defaults unless BTC declines >40% from origination AND early default.
Capital Recycling
Upon default, recovered Bitcoin is re-issued to new customers at current market's 1.92x pricing without additional capital deployment. Traditional consumer lenders must deploy fresh capital to replace defaulted principal; recovered Bitcoin regenerates origination capacity automatically.
Implication: Warehouse capacity self-replenishes through collateral recycling, reducing capital call requirements relative to unsecured consumer ABS structures.
GP Economics & Alignment
No performance fee. GP generates economics through 1% servicing fees on outstanding balances ($80M annually at $8B steady state).
2. MANAGEMENT TEAM
Marc Dumpff - CEO & Capital Markets Operated regulated funds under FMA/CIMA/ECB supervision. Founded Liechtenstein hedge fund at age 20, expanded HK advisory to HK$1B+ AUM in 6 months. Associate Partner, Noviganto (advises ECB, IMF, World Bank, EU). Expertise: structured finance, sovereign debt, regulatory navigation, capital markets infrastructure.
Evan Kalimtzis - Chief Investment Officer & Securitization 25+ years structured credit. Managing Director & Co-Head, JP Morgan CIO Strategic Portfolio Analytics and Risk ($400B portfolio oversight). Founded Asteri Capital ($550M credit hedge fund, Glencore-seeded). Managing Director positions: JP Morgan CIO International Risk, Dresdner Kleinwort structured credit proprietary trading, CSFB European Credit Strategy (top 3 ranked). Expertise: ABS/RMBS, CDO/CLO structuring, credit derivatives, securitization execution.
Peter D. Howard - Chief Risk Officer & Structured Products 20+ years structured products and ABS trading. Built $10B+ ABS portfolio as Partner & Senior PM at major European hedge fund. Head ABS/CMBS proprietary trading, Dresdner Kleinwort (established first North America sell-side ABS platform). Managed $2.5B ABS portfolio, BNP Paribas. Expert witness on ABS litigation. Expertise: ABS securitization, rating agency coordination, structured credit portfolio management.
Alexander Watanabe - Chief Product Officer & Cross-Asset Lending 20+ years blockchain, AI/ML, product development. Built cross-asset lending protocol enabling world-first NFT shorting platform. Founded unsigned_algorithms NFT collection (31K+ sold, $1.6M revenue). Led AI/ML forecasting, Suntory Global (Jim Beam, Maker's Mark, Yamazaki, Hibiki). Technology & Automation lead, Godrej (developed aerospace robotics for ISRO, Boeing, Rolls Royce, Safran). Expertise: blockchain financial products, AI/ML forecasting, rapid technical adaptation.
Korneliusz Caputa - Chief Technology Officer & Financial Infrastructure 15+ years building FinTech/Web3 infrastructure. Co-Founder, Makers' Den (CTO-level delivery for global FinTech/Web3 clients). Scaled Axo.trade DEX to 10K+ daily active users. Executive advisory, Klarna (built global payment flow engineering teams). Developed trade execution DSL and risk management language for institutional trading systems. Expertise: systems architecture, FinTech/DeFi infrastructure, cloud/microservices, technical due diligence.
Team History: Core team executed together 10-15 years across regulated funds, sovereign debt, and trading infrastructure.
Key Hires in Progress:
Mateusz Goślinowski - Head of Credit Risk & Quantitative Models (joining at close) 5+ years quantitative development, Standard Chartered Bank (counterparty credit risk, regulatory reporting, liquidity modeling over multi-billion balance sheet). Built Axo DEX order matching engine (millions daily transactions). Expertise: credit risk modeling, large-scale financial computations, functional programming (Haskell, Rust). Double Bachelor: Mathematics & Computer Science, Warsaw University.
Jonathan Thaler - Head of Securitization Infrastructure & Integration (joining at close) 15+ years mission-critical financial infrastructure. Enterprise Architect, IGS Swiss Social Security (leads cloud/AI transformation for 16 Swiss Cantons + Liechtenstein). Technical Lead, Axo DEX on Cardano (ranked 3rd in trading volume, settled millions daily). Expertise: enterprise architecture, financial data integration, automated securitization workflows, high-assurance development. PhD Computer Science, University of Nottingham.
Note: Detailed team biographies and references available in management presentation materials.
3. OPERATING EXPENSES
Fund Operating Expenses (Capped at 0.5% NAV Annually)
The following expenses are capped at 0.5% of NAV annually. Any costs exceeding this cap are borne by the GP.
| Expense | Estimated Amount |
|---|---|
| Fund Administrator | $150-250K annually (Alter Domus) |
| Audit | $100-150K annually (Big 4 auditor) |
| Legal & Compliance | $200-300K annually (Stinson LLP) |
| Other Operating | Insurance (D&O, E&O, cyber), trustees, marketing |
Total Cap: 0.5% of NAV annually (excess borne by GP)
Pass-Through Costs (At Cost)
| Expense | Rate | Notes |
|---|---|---|
| Purchase Plan Servicing | 1.0% of outstanding balances | GP-operated servicing platform. Includes custody (4 bps Fireblocks Trust pricing), payment processing, collections, customer service, delinquency management. This is the GP's primary economic driver, incentivizing operational excellence and asset growth. |
| Bond Issuance | 3.0% (first) / 1.5-2.0% (subsequent) | Rating agencies, underwriters, legal, trustee, SPV structuring |
Note: See Section 1 (Fund Overview) for GP compensation details.
4. CAPITAL STRUCTURE & LEVERAGE STRATEGY
Unleveraged by Design: The Fund operates without warehouse financing facility leverage or warehouse credit facilities. This is a deliberate risk management decision, not a financing constraint.
Rationale:
Current warehouse facility pricing (SOFR + 250-350bps) versus projected unleveraged returns (18% Base Case IRR) does not justify the operational complexity, covenant restrictions, or instantaneous call risk inherent in warehouse financing facility facilities. Historical precedent (2008 Lehman, March 2020 COVID, March 2023 SVB) demonstrates warehouse lines disappear during stress events when most needed.
Unleveraged structure ensures LP capital cannot be margin-called or force-liquidated, maintains complete control over securitization timing, and eliminates leverage-related fees and reporting requirements.
Future Consideration: Should exceptionally favorable terms emerge (SOFR + <150bps, non-recourse, multi-year commitment), the GP may revisit leverage subject to LPAC approval. Given current unleveraged returns exceed institutional benchmarks, leverage remains optional enhancement, not operational requirement.
5. REDEMPTION RIGHTS
Lockup: 24 months from each capital call date (per capital call basis). Aligns with asset duration and warehouse cycles. No early redemption except GP material breach or fund termination.
Redemption Terms (Post-Lockup): Email request with 30 days notice. Payment: original capital + pro-rata NAV (90% LP share). Subject to capital availability via bond proceeds, excess spread, or SPV liquidations. FIFO queue. No forced liquidation rights.
Expected Timelines: 60-180 days (normal conditions), 18-24 months (stress conditions). LPs should consider capital illiquid despite redemption rights.
Note: Detailed redemption procedures, GP execution strategy, and high-water mark mechanics detailed in LPA.
6. VALUATION & NAV METHODOLOGY
Frequency: Monthly (reported within 15 business days of month-end)
Administrator: Alter Domus (in negotiation)
Methods:
- Purchase Plans: Amortized cost less credit loss reserves (90d delinquent = 70% reserve; 180d = 100%)
- SPV Equity: DCF at 15-20% discount rate, quarterly updates
- Bitcoin: Mark-to-market (Coinbase/Kraken/Gemini average or Bloomberg BCOMSP)
- Cash: Face value
Oversight: Annual Big 4 audit; LPAC may request third-party valuation if disputed (>5% variance)
7. CAPITAL STRUCTURE & DEPLOYMENT
Capital Commitment
- Minimum: $1M per LP
- Launch Threshold: Fund commences operations upon $25M aggregate subscriptions
- Maximum Fund Size: $1B hard cap
- Enrollment Window: Open until $1B capacity reached; soft close thereafter (existing LPs may increase commitments subject to LPAC approval)
- Contribution Methods: USD wire transfer or BTC deposit (valued at market price on deposit date)
- Calls: 30 days notice, 60-90 day frequency
- Default: 10% interest + 10-day cure period; forfeiture if >30 days
- Overcall Protection: Max 100% of commitment (except pro-rata expenses or emergency margin calls with LPAC approval)
Deployment Cycle (Per $100M Tranche)
Day 0 - Origination:
- Deploy $100M to acquire Bitcoin
- Originate purchase plans ($50-$10K/month, 4-120 month terms)
- Portfolio scale: 160-32,000 customers per tranche (varies based on payment distribution; expected range 500-3,000)
Days 1-300 - Seasoning (Base Case):
- Collect payments, build 10-month payment performance history
- Build credit history data for institutional buyer evaluation
Rating Agency & Investor Seasoning Requirements:
Bond sale timing depends on rating agency selection and institutional investor requirements for demonstrated payment history:
- Unrated/Private Placement (Base Case): 10-month minimum seasoning required to establish payment performance data for credit-focused institutional buyers
- Egan Jones Rating (Upside Case): 12-month seasoning for credit rating issuance
- Moody's/Fitch Investment Grade (Long-Term Aspiration): 4-5 years of demonstrated performance required for investment-grade rating consideration
Base Case Assumption: All financial projections and return models assume 10-month seasoning periods for ALL tranches, not just initial issuances. This conservative approach reflects:
- Novel asset class with no market precedent
- Institutional investor due diligence requirements for payment history
- Credit committee approval processes at ABS-focused buyers
- Uncertain market acceptance timeline for Bitcoin-backed receivables
Potential Upside (Not Modeled): As the Fund establishes track record and market acceptance, subsequent tranches MAY achieve shorter seasoning periods (90-180 days) if institutional buyers become comfortable with the asset class performance. However, LPs should not underwrite to this potential acceleration, as market conditions, rating agency requirements, and investor appetite remain uncertain.
Day 300 - Bond Issuance (Base Case Timeline):
- Sell $70M AAA + $20M BBB tranches (70% + 20% of $100M tranche)
- Retain $10M equity in SPV (10% of $100M tranche)
- Receive $90M proceeds from bond sale, net $88M after 2% issuance fees ($1.8M)
Day 301+ - Capital Recycling:
- $90M proceeds return to warehouse for next tranche origination
- $10M equity remains locked in SPV generating excess spread
- New origination cycle begins with 10-month seasoning requirement
Fund Capacity
$1B warehouse → 80 outstanding tranches → $8B total bond capacity
ABS Market Positioning
Comparable Asset Class: Bitcoin-backed installment purchase plans structure similarly to Buy Now Pay Later (BNPL) consumer ABS, with Bitcoin serving as credit enhancement.
Market Comparables (2024-2025):
| Issuer | Structure | Collateral | AAA Yield | AAA Credit Enhancement | BBB Yield |
|---|---|---|---|---|---|
| Affirm 2024-B | BNPL installments | Unsecured | 6.3% | 26.99% | 7.4% |
| Klarna | BNPL installments | Unsecured | ~6.5% | ~27% | ~8% |
| Subprime Auto (avg) | Auto loans | Cars (depreciating) | ~7% | 55-60% | ~10% |
| BTC Now | Bitcoin installments | Bitcoin (liquid 24/7) | 7.0% | 30% | 10.0% |
Key Differentiators:
- Collateral: Unlike unsecured BNPL, BTC Now retains Bitcoin collateral liquidatable upon default, providing downside protection unavailable in traditional BNPL structures
- Credit Enhancement: 30% total credit enhancement (20% BBB + 10% equity) exceeds Affirm's 26.99% and Klarna's ~27%
- Collateral Efficiency: BTC Now requires 30% credit enhancement vs. subprime auto's 55-60% due to Bitcoin's superior liquidity (24/7 trading vs. 90-day repo/auction) and non-depreciating nature
- Recovery Rate: Bitcoin liquidation provides partial principal recovery vs. 0% recovery on unsecured BNPL defaults
- Dual Recovery Mechanism: Installment purchase structure enables Fund to retain all payments made PLUS Bitcoin collateral upon default, creating positive recovery scenarios even with 20-40% Bitcoin price declines (see Section 1 Structure Distinction for detailed example)
- Self-Healing Warehouse: Defaulted Bitcoin is re-issued to new customers at new 1.92x market price without additional capital deployment. Traditional lenders must deploy fresh capital to replace defaulted loan principal; BTC Now recycles the same Bitcoin asset infinitely, creating 4-5x capital efficiency advantage (see Section 1 for recycling example)
- Yield Premium: AAA tranche offers 70bps premium over comparable BNPL for superior collateral protection
Institutional Fit: Bonds align with existing BNPL and consumer ABS investment mandates. Bitcoin serves as credit enhancement (liquidated on default), not investment exposure. Structure comparable to auto ABS (installment loans with liquid collateral) but with 24/7 collateral liquidity vs. 90-day auto auction cycles.
Target Investors: BNPL ABS buyers, consumer ABS credit funds, multi-strategy credit hedge funds, structured credit CLO managers.
8. IMPORTANT DISCLOSURES
No Historical Performance
BTC Now is newly formed with no track record. Projected returns based on financial modeling; actual results may differ materially.
GP Economics & Alignment
See Section 1 for zero performance fee structure and alignment mechanism.
Market Risks
- Customer defaults (primary risk)
- Bitcoin price volatility: UP = favorable (customers "in the money"); DOWN = adverse (mitigated by FICO impact, sunk costs, liquidation rights)
- Bond market pricing and institutional demand
- Regulatory changes
- Operational execution
Stress Testing
Structure modeled to survive 70% lifetime defaults + 90% Bitcoin price decline via first-loss equity, collateral liquidation, and credit reporting deterrence.
Key Insight: Bitcoin price increases REDUCE default risk (customers acquiring appreciating asset); decreases INCREASE risk (mitigated by protections).
Quantitative Risk Management
Monte Carlo simulation (10,000 paths, Rust-based) calibrated to subprime auto (2008-2010) and BNPL default curves (Affirm/Klarna). Key assumptions: 10-month seasoning per tranche, $50-$10K monthly payment range, portfolio scale 160-32,000 customers per tranche depending on payment distribution.
Model documentation, source code, and validation scripts available for LP due diligence. Independent third-party validation (Moody's Analytics, MSCI, Numerix) commissioned upon closing.
Forward-Looking Statements
All projections subject to risks and uncertainties. Returns may vary materially based on market conditions, pricing adjustments, and operational performance.
9. NEXT STEPS
Due Diligence Materials Available
- Full investor deck
- Financial model with stress scenarios
- Legal structure confirmation (Stinson LLP)
- Custody arrangement details (Fireblocks Trust)
Standard Provisions
Governance, Conflicts, and Legal Terms: Standard institutional fund provisions including LPAC structure and consent rights, information rights (monthly/quarterly/annual reporting), key person provisions, conflicts of interest policies, GP co-investment requirements, investment restrictions, custody and operational protocols, service provider details, and termination events will be detailed in the definitive Limited Partnership Agreement and follow institutional market standards.
Investment Process
- Review & Q&A: Investor review of materials and management meetings
- Preliminary Indication: Non-binding indication of interest
- Definitive Documentation: Negotiation and execution of Limited Partnership Agreement
- Capital Commitment: Signed commitment with initial funding
- Ongoing Reporting: Monthly performance reports and annual audited financials
Timeline
- Q1 2026: Warehouse LP roadshow
- Q2 2026: Target close for warehouse facility; Bitcoin Conference launch event (April 27, 2026) with initial originations
- Q3 2026: First securitization with real performance data
CONTACT INFORMATION
BTC Now, LP General Partner
Marc Dumpff CEO & Capital Markets [Contact details]
LEGAL DISCLAIMER
This term sheet is provided for discussion purposes only and does not constitute an offer to sell or solicitation of an offer to buy securities. Any such offer or solicitation will be made only through definitive offering documents and subscription agreements. Investment in the Fund involves significant risks, including loss of principal. Prospective investors should carefully review all offering materials and consult with their legal, tax, and financial advisors before investing.
The securities offered have not been registered under the Securities Act of 1933 or applicable state securities laws and are being offered pursuant to exemptions from registration. The Fund is only available to accredited investors and qualified purchasers as defined under applicable securities laws.
BTC Now Warehouse Fund, LP - Term Sheet Confidential - November 6th, 2025
APPENDIX A: SIMULATION SCENARIOS & MODEL METHODOLOGY
BTC Now Warehouse Fund, LP Confidential - November 6th, 2025
USD SCENARIOS (UNLEVERAGED)
For investors contributing USD capital
Returns are denominated in USD terms, optimizing for dollar value growth. All scenarios reflect unleveraged performance (zero warehouse financing facility leverage) with 10-month seasoning periods. The Fund operates unleveraged by design for risk management purposes.
| Scenario | LP IRR (USD) | Final NAV (USD) | Cumulative Defaults | BTC Terminal Price | Assessment |
|---|---|---|---|---|---|
| Bull Case | 18.4% | $809.9M | 29.1% | $1M | Exceptional unleveraged returns with favorable macro conditions |
| Base Case | 17.8% | $768.8M | 33.3% | $500K | Target returns for underwriting - market-standard credit performance |
| GFC Scenario | 15.2% | $618.5M | 53.5% | $120K | Strong crisis resilience - positive returns despite 54% defaults |
| Bear Case | 13.3% | $512.5M | 45.4% | $30K | Double-digit returns despite severe recession + 70% BTC decline |
| Stress Case | 8.0% | $322.4M | 65.3% | $10K | Capital preservation despite permanent 90% BTC collapse + catastrophic defaults |
HOLD-TO-MATURITY SCENARIOS (NO BOND SALES)
Downside Execution Risk: Securitization Market Does Not Develop
The following scenarios assume the Fund cannot sell bonds to institutional investors and must hold all purchase plans to maturity. This represents the downside execution risk if securitization markets freeze or institutional appetite for Bitcoin-backed ABS does not develop as projected.
Key Trade-off: Without bond sales, the Fund cannot recycle capital efficiently, reducing total return potential. However, the Fund remains cash-flow positive and generates returns above traditional private credit strategies even in this constrained scenario.
| Scenario | LP IRR (USD) | Final NAV (USD) | Cumulative Defaults | BTC Terminal Price | Assessment |
|---|---|---|---|---|---|
| Bull Case | 15.1% | $614.2M | 29.2% | $1M | Strong returns despite no capital recycling; hold-to-maturity beats most credit funds |
| Base Case | 14.2% | $566.1M | 32.5% | $500K | Target downside floor - double-digit returns without securitization execution |
| GFC Scenario | 13.4% | $528.4M | 49.7% | $120K | Resilient performance even in crisis + no bond market access |
| Bear Case | 12.0% | $464.9M | 44.4% | $30K | Double-digit returns despite severe recession + no exit liquidity |
| Stress Case | 8.1% | $326.2M | 66.8% | $10K | Capital preservation despite catastrophic defaults + zero securitization capability |
Interpretation:
- The Base Case hold-to-maturity IRR represents the Fund's downside floor if bond markets do not materialize
- The Fund generates positive returns across all scenarios except extreme stress, even without bond market access
- This demonstrates the fundamental strength of the installment plan economics independent of securitization execution
- Securitization provides return enhancement, not survival dependency
- The delta between "with bonds" and "without bonds" scenarios quantifies the value of securitization optionality
Why This Matters:
Unlike traditional warehouse facilities that require bond sales to repay credit lines (forced execution risk), BTC Now's unleveraged structure allows the Fund to hold assets to maturity if market conditions are unfavorable. This optionality protects LPs from forced liquidations during market stress and ensures positive returns even if the securitization thesis takes 3-5 years to prove out.
HOW TO READ THESE SCENARIOS
IMPORTANT: All scenarios reflect unleveraged (zero warehouse financing facility leverage) performance with 10-month seasoning periods per tranche. The Fund operates unleveraged by design for risk management purposes (see Section 4 of Term Sheet).
Base Case (33% defaults, BTC $500K): Our expected outcome reflecting market-standard consumer credit defaults and moderate Bitcoin appreciation over 10 years. Underwrite to this scenario. This represents normal economic conditions with BNPL/subprime auto-aligned default rates. 17.8% IRR unleveraged.
Bull Case (29% defaults, BTC $1M): Favorable macroeconomic conditions with strong Bitcoin institutional adoption and below-market defaults due to strong employment. Demonstrates upside potential. 18.4% IRR unleveraged.
Bear Case (45% defaults, BTC $30K): Recession scenario with elevated consumer credit defaults (consistent with 2008-2010 levels) and significant Bitcoin price decline. Tests downside protection and recovery mechanisms. 13.3% IRR unleveraged despite 70% Bitcoin decline.
GFC Scenario (54% defaults, BTC $120K): Systemic financial crisis with defaults exceeding 2008 subprime auto levels. Demonstrates structure survival in extreme stress despite catastrophic default rates. 15.2% IRR unleveraged.
Stress Case (65% defaults, BTC $10K): Extreme tail risk beyond any historical precedent—sustained 90% Bitcoin decline over 10 years (never occurred historically; BTC has recovered from all 70-93% drawdowns within 12-36 months). Capital preservation boundary test, not a forecast scenario. 8% IRR unleveraged demonstrates positive returns even in permanent Bitcoin collapse scenario.
Key Insight: Bitcoin Price Drives Returns More Than Default Rates
Returns are more sensitive to Bitcoin terminal price than default frequency due to the dual recovery mechanism (retained installment payments + Bitcoin collateral liquidation). This explains why GFC scenario (54% defaults + modest BTC appreciation to $120K) outperforms Bear scenario (45% defaults + severe BTC decline to $30K): when Bitcoin holds value, collateral recovery offsets even catastrophic default rates. When Bitcoin crashes 70%, lower defaults still result in inferior returns due to low collateral value at liquidation.
GFC Scenario: 54% defaults + BTC $120K terminal = 15.2% IRR Bear Scenario: 45% defaults + BTC $30K terminal = 13.3% IRR
UNDERSTANDING THE RESULTS
Why GFC Returns Exceed Bear Despite Higher Defaults
GFC Scenario: 53.5% defaults + BTC $120K terminal = 15.2% IRR Bear Scenario: 45.4% defaults + BTC $30K terminal = 13.3% IRR
Explanation: Bitcoin price at default liquidation drives loss-given-default (LGD), not default frequency alone.
- Bear scenario: Lower defaults (45.4%) BUT collateral crashed 70% (to $30K) → high loss per default due to minimal collateral recovery value
- GFC scenario: Higher defaults (53.5%) BUT collateral appreciated 20% (to $120K) → collateral recovery partially offsets defaults, plus all installment payments already retained
The dual recovery mechanism (retained installment payments + Bitcoin collateral liquidation) creates positive recovery scenarios when Bitcoin holds value, even with catastrophic default rates. This is fundamentally different from traditional consumer lending where LGD is fixed regardless of collateral performance.
Key Takeaway: Even in the severe Bear Case (45% defaults + 70% Bitcoin decline), the Fund delivers 13.3% IRR unleveraged, demonstrating exceptional downside protection relative to traditional consumer ABS structures.
Default Rate Benchmarking
Industry Context:
- Bull/Base (30-36%): Aligned with seasoned BNPL (Affirm, Klarna) and subprime auto ABS lifetime default performance for FICO 620+ borrowers
- Bear (53%): Consistent with 2008-2010 recession consumer credit default peaks (credit cards, personal loans)
- GFC/Stress (65%): Significantly exceeds historical subprime auto defaults during 2008 crisis (peak 15-20% annually, ~35-40% lifetime cumulative)
Modeling Conservatism: Base case assumes FICO 620+ credit quality with stress scenarios modeling defaults 2-3x higher than historical subprime precedents, reflecting prudent approach to novel asset class with zero performance history.
MODEL METHODOLOGY SUMMARY
The BTC Now Warehouse Fund financial projections are derived from a production-grade Monte Carlo simulation engine built in Rust with institutional-grade accounting infrastructure. The model employs a time-driven, event-based architecture with double-entry ledger accounting, simulating day-by-day cash flows across a 10-year horizon (matching the 10-year purchase plan term structure). Default events are modeled probabilistically using calibrated annual default curves derived from subprime auto loan and BNPL (Buy Now Pay Later) datasets, with monthly default probability checks for each active buyer. Bitcoin price evolution follows a Geometric Brownian Bridge process, starting at the initial price ($100K) and converging to the specified scenario terminal price over the 10-year horizon. Volatility parameters control intra-period price fluctuations while ensuring deterministic endpoint convergence, enabling scenario analysis with realistic path volatility and predictable long-term outcomes.
All cash flows are discounted to Net Present Value using a 10% discount rate (aligned with the LP hurdle rate), ensuring returns reflect time value of money. The model incorporates full waterfall mechanics including bond tranche priorities (AAA → BBB → Equity), buyer liquidation protocols (35-day grace period, 25% liquidation fee), warehouse financing facility credit facility dynamics (10:1 maximum leverage, 80% LTV, SOFR + 300bps), and performance guarantees (24-month non-performing loan replacement window). Each simulation produces transaction-level audit trails with balance sheet integrity verification, ensuring all USD and BTC balances reconcile across entities.
Model validation includes comprehensive unit testing, double-entry accounting verification (ensuring zero net balance across all entities), and IRR calculation accuracy checks using Newton-Raphson iterative methods. The scenarios presented below represent deterministic runs with specific parameter configurations, demonstrating fund performance across a range of market conditions from optimistic to severe stress. All configurations are available for independent review and replication by prospective Limited Partners during the due diligence process.
MODEL VALIDATION & AVAILABILITY
All scenario configurations are executable and replicable by prospective Limited Partners. The simulation engine source code, configuration files, and validation scripts are available for review during the due diligence process. Independent third-party model validation by a recognized quantitative risk firm (Moody's Analytics, MSCI, Numerix) will be commissioned upon fund closing and repeated annually thereafter.
Prospective LPs are encouraged to:
- Request custom scenario analysis with alternative assumptions
- Review source code and model documentation
- Propose sensitivity analyses on specific parameters (default rates, volatility, leverage limits)
- Engage independent model validators at GP expense (for commitments >$25M)
Questions regarding model methodology or custom scenario requests should be directed to:
Evan Kalimtzis - Chief Investment Officer Peter D. Howard - Chief Risk Officer
This appendix is an integral part of the BTC Now Warehouse Fund, LP Term Sheet dated November 6th, 2025. All scenarios are for illustrative purposes and do not constitute guarantees of future performance. Actual results will vary based on market conditions, operational execution, and customer behavior.
APPENDIX B: INVESTMENT ALTERNATIVES COMPARISON
BTC Now Warehouse Fund, LP Confidential - November 6th, 2025
INVESTMENT STRUCTURE COMPARISON
| Characteristic | BTC Now Fund | BTC Treasury | Crypto Miners | Spot ETFs | Direct BTC |
|---|---|---|---|---|---|
| Primary Return Driver | 15% APR installment yield | BTC price | BTC production + price | BTC price | BTC price |
| Leverage | None | 1.5-2.5x (debt) | Variable | None | None |
| BTC Price Beta | 0.2-0.5x | 1.5-2.5x | 2.0-4.0x | 1.0x | 1.0x |
| Liquidity | Quarterly (24mo lock) | Daily | Daily | Daily | Instant |
| Minimum | $1M | ~$100 | ~$100 | ~$50 | Any |
PERFORMANCE SCENARIOS (10-Year Horizon)
Note: BTC Now returns are simulated. Fund has no operating history.
Scenario 1: Bitcoin Flat at $100K
| Investment | 10-Year Absolute Return |
|---|---|
| BTC Now Fund (With Bonds) | +412% ($150M → $768M, 17.8% IRR) |
| BTC Now Fund (No Bonds) | +277% ($150M → $566M, 14.2% IRR) |
| BTC Treasury | Variable, BTC-dependent |
| Crypto Miners | Variable, BTC-dependent |
| Spot ETFs / Direct BTC | ~0% |
Scenario 2: Bitcoin Crashes to $30K (-70%)
| Investment | 10-Year Absolute Return |
|---|---|
| BTC Now Fund (With Bonds) | +242% ($150M → $512M, 13.3% IRR) |
| BTC Now Fund (No Bonds) | +210% ($150M → $465M, 12.0% IRR) |
| BTC Treasury | Variable, BTC-dependent |
| Crypto Miners | Variable, BTC-dependent |
| Spot ETFs / Direct BTC | -70% |
Scenario 3: Bitcoin to $1M (+900%)
| Investment | 10-Year Absolute Return |
|---|---|
| BTC Now Fund (With Bonds) | +440% ($150M → $810M, 18.4% IRR) |
| BTC Now Fund (No Bonds) | +310% ($150M → $614M, 15.1% IRR) |
| BTC Treasury | Variable, highly BTC-dependent |
| Crypto Miners | Variable, highly BTC-dependent |
| Spot ETFs / Direct BTC | +900% |
RISK PROFILE
| Investment | Expected Return | Drawdown Risk | Bankruptcy Risk |
|---|---|---|---|
| BTC Now Fund | 14-18% IRR (simulated) | No drawdowns* | None (unleveraged) |
| BTC Treasury | Variable, BTC-dependent | High (leverage) | Moderate (refinancing) |
| Crypto Miners | Variable, BTC-dependent | High (leverage) | High (operational) |
| Spot ETFs / Direct BTC | Tracks BTC 1:1 | Tracks BTC volatility | None |
*No mark-to-market; quarterly distributions; NAV reflects remaining portfolio value
For questions: Evan Kalimtzis (CIO) | Peter D. Howard (CRO)
This appendix is part of the BTC Now Warehouse Fund, LP offering materials dated November 6th, 2025.
APPENDIX C: CREDIT MARKET RISK COMPARISON
BTC Now Warehouse Fund, LP Confidential - November 6th, 2025
LEVERAGE COMPARISON
| Feature | Consumer ABS Funds | Private Credit Funds | BTC Now Fund |
|---|---|---|---|
| Warehouse Leverage | 2-4x | 1-2x | 0x |
| Lender Type | Regional/national banks | Major banks | None |
| Refinancing Frequency | 12-24 months | 24-36 months | Never |
| Forced Liquidation Risk | High | Moderate | Zero |
| Interest Expense | SOFR + 250-350bps | SOFR + 150-250bps | 0% |
Key Difference: BTC Now uses LP capital as permanent warehouse capacity (unleveraged by design), eliminating refinancing and forced liquidation risk.
SCENARIO COMPARISON
Note: BTC Now returns are simulated. Fund has no operating history.
Normal Credit Markets
| Strategy | LP Net IRR |
|---|---|
| Consumer ABS Funds | 12-15% |
| Private Credit Funds | 10-14% |
| BTC Now Fund (With Bonds) | 17.8% |
| BTC Now Fund (No Bonds) | 14.2% |
Credit Market Freeze (2008, March 2020, March 2023)
| Strategy | Est. Return | Key Risk |
|---|---|---|
| Consumer ABS Funds | Significant losses possible | Warehouse lender may demand repayment |
| Private Credit Funds | Significant losses possible | Credit lines may be pulled |
| BTC Now Fund (With Bonds) | +14-17% (simulated) | No warehouse lender |
| BTC Now Fund (No Bonds) | +12-14% (simulated) | Hold to maturity |
Note: Traditional credit stress performance based on 2008 crisis; actual outcomes vary by fund.
CORRELATION TO TRADITIONAL CREDIT
| Scenario | Traditional Credit | BTC Now (Simulated) |
|---|---|---|
| Normal Markets | +12-15% | +14-18% |
| Credit Freeze | Significant losses possible | +12-14% |
| Rate Hiking Cycle | Pressure on returns | +14-18% |
| Recession | Pressure on returns | +10-12% |
Note: Correlation estimates are forward-looking based on structural characteristics.
For questions: Evan Kalimtzis (CIO) | Peter D. Howard (CRO)
This appendix is part of the BTC Now Warehouse Fund, LP offering materials dated November 6th, 2025.