Crypto Guide

NEXO dangers 50% drop as a result of regulatory stress and investor considerations

Cryptocurrency lending agency Nexo is susceptible to dropping half of its native token’s valuation by the top of 2022 because the market is skeptical about its potential chapter.

Is Nexo too centralized?

For the unversed: eight US states On September 26, a cease and desist order was filed against Nexo, alleging that the firm offered unregistered securities without alerting investors about the risks of financial products.

Notably, regulators in Kentucky accused Nexo of bankruptcy, noting that without its namesake native token, Nexo, the firm’s “liabilities would exceed its assets.” As of July 31, Nexo had 959,089,286 NEXOs in its reserves – 95.9% of all tokens in existence.

“This is a big, big, big problem because a very basic market analysis shows that Nexo will be unable to monetize a significant portion of these tokens,” said Mike Bergerberg, an independent market analyst and author of Dirty Bubble Media Substack. ” ,

“Given this fact, the true value of the $NEXO token on Nexo’s balance sheet is likely to be closer to $0.”

Examine with Celsius

Bergersberg additionally alleged that Nexo faces insolvency danger as a result of it holds the overwhelming majority of Nexo’s token provide on its platform. He in contrast Celsius Community, a now defunct crypto lending agency, which owned over 50% of its native token, CEL.

The highest 100 NEXO holders collectively personal 95.53% of the token provide. Supply: Etherscan

After attracting deposits and collateral from prospects, Celsius held over 90% of the whole CEL tokens in circulation. This made CEL extremely liquid and thus risky. In different phrases, CEL turned out to be a deeply undervalued asset to patch up Celsius’s troubled steadiness sheet.

“The Nexo token is much more liquid than the bankrupt Celsius Community’s CEL token,” warns Bergersberg, noting that the coin has a mean each day buying and selling quantity of lower than 1% of its market capitalization.

Nevertheless, a spokesperson for Nexo denied the allegations, clarifying that the information they offered to Kentucky regulators was for one of many Nexo Group entities.

“We are able to affirm that on a consolidated foundation, NEXO tokens characterize lower than 10% of the corporate’s whole property,” he advised Cointelegraph, including:

“That, in flip, exceeds the corporate’s liabilities, whatever the firm’s web place within the NEXO token.”

Concerning why Nexo holds greater than 90% of the NEXO provide, a spokesperson for the agency cited the economics and utility of the tokens, saying they create a pure incentive for purchasers to maintain their tokens on the platform.

“Along with incomes larger rates of interest on their digital asset balances by holding the Nexo Tokens on the Nexo Platform, prospects can use the Nexo Tokens as collateral, earn curiosity on them and change them immediately on the Nexo Platform. are,” he defined, including:

“The identical is true for tokens from firms with related worth propositions comparable to FTT, BNB and CRO, that are primarily held on FTX, Binance and, respectively.”

Worth of NEXO could also be heavy

Worry, uncertainty and doubt about rumors of market volatility or tighter regulation in opposition to crypto lending platforms can create adverse funding sentiment in the direction of Nexo. Sadly, the technical setup of the token suggests the identical.

RELATED: Nexo buys stake in US Chartered Financial institution

Notably, NEXO value seems to be in an ascending triangle type on its longer timeframe chart since June 12. The ascending triangle is taken into account a bearish continuation sample in a downtrend, which makes NEXO extremely inclined to cost drops.

In line with the regulation of technical evaluation, an ascending triangle resolves after value breaks under its decrease pattern line and continues to fall in the identical route till it reaches a stage that is the same as the utmost peak of the triangle. it occurs.

This setup is proven within the chart under.

NEXO/USD 3-Day Worth Chart that includes an ascending triangle breakdown setup. Supply: TradingView

If the sample is confirmed, NEXO value may drop to $0.47, which is about 50% decrease than its present value.