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The Background of Lending
Lending, the act of transferring excess wealth to those who can put it to work is as old as the invention of money itself. Records show that lending pre-dates the Roman and Greek cultures and was actively practiced by Mesopotamians. Like today, there were stringent rules guiding how borrowers and lenders co-existed.
Obviously, there has been an evolution thanks to the technological breakthroughs from the 80s through to the early 2000s. Needless to say, the needs of borrowers and lenders are pretty much the same: use these loans to fill a gap.
Like the way it has been since time immemorial, the modus operandi is pretty much the same. The lender extends excess capital in his/her position to the borrower with the trust that the latter would pay back on time and with interest or whatever rules there is to the binding contract. Often, and this is because of opportunity cost, interest will cushion the lender from inflation and other principal wiping movements. Meanwhile, the loan forwarded to the user, regardless of the mechanics guiding their arrangement, will help foster growth in one way or another.
With the same premise of lending that, there has been change. However, the fundamentals of, and attitudes towards the same is constant. From the Code of Hammurabi to the CDOs (Collateral Debt Obligations), largely blamed for the bubble of the Great Financial Crisis (GFC), and the advent of cryptocurrencies, lenders and borrowers will be always be part of the process for the benefit of all.
In the age of blockchain and cryptocurrencies, holding of valuable digital assets is yet another reason for loaning out the excess in the quest for profitability and liquidity. Of the many cryptocurrency lending platforms, Nexo is a standout. For simple reasons.
Nexo, powered by Credissimo, is a blockchain-based overdraft system where users can instantly borrow short term cryptocurrency loans based in Zug, Switzerland. The platform is automated and users-including hedge funds, miners and general investors, simply deposit supported coins in the Nexo wallet and receive instant cash loan in fiat.
Besides, interested parties can deposit coins-only on EUR, USD, GBP and stable coins as of writing, and earn daily interest from their idle assets. The terms of the loans are spelled by the Nexo Oracle and stored in an audited Ethereum smart contract. While at it, the deposited collateral is secured by BitGo and insured. Some of the platform’s unique features include the lack of credit check, no hidden fees and users need not to pay capital tax gains.
The Nexo Oracle
The Nexo Oracle is the heartbeat of the platform, governing how loans are distributed, monitoring processes and for data analytics. To determine the credit worthiness of a borrower, it uses a Loan-to-Value ratio (LVT) to the platform’s legacy lenders taking into consideration several variable including market liquidity and depth.
If the Oracle calculates your LVT ratio and finds that it is 50 percent of your deposit, then if you agree to the terms and conditions, you’ll be loaned half of your deposit in fiat.
Interest rates, in APR (Annualized Percentage Rates) are automatically determined by the Oracle, and annualized. However, if the price of the underlying asset drop by half, additional crypto deposit will be required through a margin call.
Nexo supports over 20 cryptocurrencies and tokens. Introducing flexibility, borrowers have an option of repaying in ETH, BTC, Euro, USD and NEXO, the platform’s native ERC-20 “restricted securities” token marketed as SEC-compliant under Regulation D Rule 506 (c). Different from other platforms, token holders receive proceeds from Nexo’s profitability, divided proportional to the owner’s token balance.
Running Nexo is a dedicated team led by Antoni Trenchev LL.M, the co-founder. Prior to joining Nexo he was the Chief Innovation Officer and the Member of the Advisory Board at Credissimo. There, he was the head of Fintech strategy and concurrently advised on AML and KYC rules. Similarly, Kosta Kantchev, a co-founder. Like Antoni, he was the member of the Advisory Board at Credissimo.
Georgi Shulev is yet another co-founder. He’s an expert in banking, drawing useful experiences from Unicredit Bank Austria, Lehman Brothers, and the European Investment Bank.
Evidently, Nexo has continued to flourish over time and at the moment, there are over 120 employees as Vasil Petrov, the CTO, George Manolov the business development head, Teodora Atanasova in charge of Business Development & Investor Relations, Ivan Kostov in the marketing department and Vasil Stoilov who’s in charge of risk management.
Advisors are Michael Arrington, the founder of TechCrunch and Arrington XRP Capital. The Arrington XRP Capital is perhaps the world’s first digital asset management fund that is denominated in XRP and incorporating xRapid in their processes. Michael has been voted on more than one occasion as one of the most powerful individual in the internet.
Trevor Koverko, the founder of Polymath. Through Polymath, Trevor plans on porting the multi-trillion securities market on the blockchain by the latter being a platform where startups can issue compliant securities token. Lastly, there is Paolo Tasca, the Executive Director of University College of London Blockchain Center.
Behind Nexo’s drive is the team’s ambition of solving inefficiencies in the lending market. Coming up with innovative and convenient financial solutions while leveraging the blockchain, Nexo’s is gradually becoming a solution to projects’ or individuals’ financing needs in a new digital economy.
The first Airdrop campaign was completed in Feb 2018. By March they had finalized their token pre-sale. In April, they completed their main token sale, launched their operations, lending out USD with ETH and BTC as security and the token was listed in several exchanges. In May, the initialized the process of acquiring a FDIC insured US bank, offered Euro support in June and in July launched the Nexo Credit Card.
By Q3 2018, they had automated their KYC, offered support of several cryptocurrencies, launched a Nexo mobile wallet and introduced an affiliate program. By end year, they had increased their overdraft limits and issued their second air drop.
In Q1 2019, they finalized their acquisition of the FDIC insured US bank, launching depositing accounts in the process.
As a regulated financial institution, Nexo has several strategic partnerships. Through their deal with BitGo, deposits are secure. For KYC, AML and any form of compliance, Confiado ease the process. Meanwhile, their collaboration with Securitize “and the integration of the DS protocol allows for tokenized securities issued by Securitize to be staked as collateral for Nexo’s instant credit lines, proves an incredibly powerful utility to trillions of dollars’ worth of traditional assets. Besides, Nexo works closely with UCL CBT and TrueUSD, which is “money built for the new global financial system.”
Nexo is a member of several associations including the Enterprise Ethereum Alliance (EEA), the Bitcoin Foundation, Crypto Valley, Swiss Finance + Technology Association and Bitcoin Association Switzerland.
Token and Fund Distribution
Aforementioned, Nexo is based on the Ethereum platform and therefore its native token complies with the ERC-20 standard. According to Nexo, their native token, NEXO, would be used to retain loyal customers through multiple airdrop campaigns and to incentivize customers and supporters. Each NEXO token bears dividend-paying features. As a utility, there will be a discount for borrowers who repay loans in NEXO.
Even so, the token is traded as a restricted security following the application of Nexo to the SEC for exemption. For successful launching, the team needed $52.5 million, the hard cap, which they crowd funded in an initial coin offering that took place from Mar 6 to April 1 where KYC was mandatory and investors from China barred.
During the main token sale, each token retailed at $0.1. In total there were 525 million NEXO tokens available for investors. The 525 million translated to 52.5 percent of the total token generated fixed at 1 billion. Of this, 25 percent was set aside for Overdraft Funding Reserves, 11.25 for founders and vested quarterly, 6 percent for the community and Airdrop campaigns and 5.25 percent to meet the need of Advisors, Legal and general PR. BTC and ETH were the only accepted coins during the public sale.
From the collected funds, 80 percent will go towards crypto overdraft funding, 8 percent towards IT development, 7 percent to cater for operational expenses and 5 percent towards marketing and growth.
ROI and NEXO Performance
Available in several exchanges as HitBTC, Hotbit, Mercatox and Yobit, NEXO’s 12-month volatility is 125.82 percent. Its maximum draw down is 91.61 percent and it is 12 month ROI-from launch and trading is 26.29 percent.
However, the ICO ROI is -27.05 percent at spot prices. The token’s market cap is $40,849,737, trading $5,055,616 in 24 hours, adding 3.75 percent. There are 19,048 NEXO holders and there have been 152,611 transfers even though the coin is down 23.59 percent against ETH but up 93.88 percent against ETH in the last year.
Short term Price Catalysts
The success of any lending platform depends on its ability to deter hackers and keep customers’ deposit secure. Nexo has that covered. Through their partners as renowned SEC-approved custodian, BitGo and Confido, the platform can assure customers of their assets’ safety while keeping track of borrowers.
The second gauge has to the speed of approval and disbursement of loans. Because of automation made possible by smart contracts and the Nexo Oracle for LVT calculation, Nexo has been successful distributing over $700 million from their wide customer base exceeding 200k.
There is diversity. Nexo’s customers are global, spread over 200 jurisdictions from where over 45 currencies are supported. Cumulatively, there are over $1 billion instant loan requests placed on the platform.
Drawing from this, it is no surprise that they are planning to launch a mobile app for iOS and Android, and later a Credit Card for their European clientele to even better the customer experience. Last month, they added TRX as one of the supported digital asset customers can borrow instant loans from. Recently, they paid out $2.409 million as dividends for token holders from where each NEXO token drew $0.0033 as dividend. There was no withholding tax imposed.
On top of this, Nexo is working on Utilities 2.0 for the NEXO token. Upon finalization, the token will bring a plethora of new amazing utility features, drawing demand for the token with “better interest rates on all Nexo products Premium features and functionalities Nexo Card cashback.”
Long term Price Catalysts
The confidence for investors is from the quality of the Nexo team. Before diverging and settling on the blockchain, they played key roles in Credissimo. Likewise, the involvement of Michael Arrington, an influencer in the crypto world and the head of a hedge fund denominated in crypto is good news. That is perhaps the steam that keeps the team going.
At the time of writing this changing hands at $0.072250, but given the trend of the crypto lending market, projected to attract more users and even balloon to their trillions in coming years, Nexo investors will not only benefit from superior return on investment but from the low APR as they would be categorized as loyal and incentivized better.
Presently, their APR is 8 percent per year while lenders can earn the same interest rate on stable coins as TrueUSD, one of their partner, but plans to expand that to BTC, ETH and even XRP.
Further, their strategic partnership with Terra to expand the cryptocurrency market in South Korea, from where Nexo has a huge following will further cement Nexo as a leading crypto lending platform in the world. In their deal, the Zug-based crypto lending platform will accept Terra token deposit from the soon-to-be launched lending platform focusing on the SE Asia market.
Already, Nexo has a partnership with TrueUSD but the deal with Terra, a stable coin that incorporate algorithm to maintain the price of its token at a desired rate via another token, Luna, impressed Nexo’s executives.
When Buy? When Sell?
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