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Friday, December 9, 2022
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    HomeMarketIs Nexo safe? Crypto lender withdraws $150 million from MakerDAO

    Is Nexo safe? Crypto lender withdraws $150 million from MakerDAO

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    It’s the unlucky actuality that any crypto lender nowadays shall be met with scrutiny, because the market nonetheless reels from the chaos brought on by Celsius earlier this 12 months.

    Nexo has so far separated itself from the group. Final week it even introduced a stake in federally chartered Summit Nationwide Financial institution. It has repeatedly said it’s going to steer clear from uncollaterised lending. It even launched a takeover bid for Celsius because the embattled lender was spiralling into insolvency (even when there’s a probability that it was solely a publicity stunt).

    However now there’s added concern after regulatory hassle and a few curious on-chain motion.

    Regulation

    Eight states filed cease-and-desist orders towards Nexo final week. It’s the standard story surrounding whether or not the merchandise supplied represent securities. I gained’t get into the ins and outs as a result of I’m no lawyer, however the specter of requiring to withdraw sure merchandise from the US market may clearly squeeze Nexo onerous.

    Regulators in Kentucky truly accused Nexo of being bancrupt, declaring that with out its native token – NEXO – the agency would have “liabilities (that may) exceed its property”. For anybody with a brief reminiscence, that’s precisely what Celsius led earlier than they suspended withdrawals and filed for chapter.

    With the Nexo token having a particularly low buying and selling quantity of 1% of its market capitalisation, what individuals don’t realise is that if the whole lot does flip the wrong way up, the flexibility of Nexo to monetise its holdings is considerably lower than one would consider on-paper. Hnece the priority.

    Nexo transferring cash on-chain

    The second half comes with a humorous withdrawal on-chain that had individuals curious. A pockets labelled a Nexo pockets yesterday withdrew over $150 million from MakerDAO.

    https://twitter.com/WuBlockchain/status/1576016313918836736

    Clearly, this has lots of people involved given the parallels with the Celsius scenario. For what it’s price, it will shock me if any insolvency for Nexo got here amid a interval of relative market calm.

    Nonetheless, the actual fact cease-and-desist orders had been issued by regulators just lately does add an additional layer right here. However then once more, the difficulty of security-or-not-a-security has hardly been unpredictable – Nexo ought to have, and certain did, know this was coming.

    After the strikes drummed up some controversy available in the market, Nexo issued a press release clarifying that “this routine transaction made yesterday represents a mortgage reimbursement according to the most recent market dynamics and as per the corporate’s customary treasury administration.” 

    My tackle this? I nonetheless consider Nexo are OK, but when I had funds in there I might positively be a bit of extra nervous at present than I used to be final week. Like I mentioned as Terra was taking place, the yield on provide for these merchandise proper now merely isn’t well worth the danger. Most provide yields of round 4% on Bitcoin (Nexo’s base charge is 3%-4%) – are you actually keen to danger all of it for that? 

    Additionally it is unusual that Nexo didn’t warn the market prematurely to quell any concern, as this too would have been apparent.

    The sensible risk-reward play proper now’s simply to sit down out the yield-generating merchandise for now till we have now a clearer image. As a result of regardless that I believe Nexo are OK and that is possible a a lot furore about nothing – I’m on document discussing how effectively I consider Nexo I run in relation to a number of different companies within the trade – we actually can’t know for certain…and that claims all of it.  





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