The NEXO price crashes 40% in three days due to insolvency rumors, with the company saying that it has no exposure to Three Arrows Capital liquidity issues so let’s read more today in our latest Nexo news.
The NEXO price continued falling as the lending companies continue to be shaken by the crashing market. In the meantime, Nexo denied rumors of exposure to Three Arrows Capital but the price still suffered on the DEFI contagion fears. NEXO serves as a security token at a lending platform of the same name and it fell about 25% to $0.61 which is the lowest price point since January 2021.
Оver 2 years ago, we declined 3AC’s request for unsecured credit. We learned that they acquired it elsewhere.
It is now obvious that Nexo’s approach was correct. This is why our assets exceed our liabilities:https://t.co/nKmWs2ckte
— Nexo (@Nexo) June 15, 2022
The massive intraday decline came as a part of the broader downside move this week which brought Nexo’s losses to 40%. The ongoing condition in the crypto lending sector also contributed to Nexo’s crashing price. The traders fear that most DEFI/CEFI companies that offer high yields to clients on their crypto deposits, will default on their debts because of a wipeout of .
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5 trillion from the market in 2022. the concerns continue mounting after the collapse of Terra. A month later, the Celsius Network offered clients up to 18% yields and paused withdrawals because of extreme market conditions.
The Celsius clients pulled almost half of their assets out of the platform since October 2021 and left it at $12 billion to meet the debt obligations. In the meantime, Three Arrows Capital witnessed liquidations of $400 million and the on-chain data also shows the company could have a minimum debt of $183 million against the collateral position of $235 million to the fund can transfer the economic risks to the lenders if it becomes insolvent. Market commentator Degentrading added:
“The lenders will bear the PnL [profit and loss] difference between how much they are owed versus what they get in liquidating their collateral. That means defaults will cause SIGNIFICANT EQUITY erosion […] Not all lenders are made equal. Celsius is the worst. It has gone under. Nexo, I don’t know. BlockFi is pretty bad as well.”
Nexo says it is currently not exposed to Three Arrows Capital despite partnering with the fund over an NFT lending product back in 2021. the company asserted that the partnership with 3AC didn’t take off. Nexo has 100% liquditiy to meet the $4.96 billion worth of obligations as per the US-based audit firm Armanino which raises the potential to avoid a liquidity crisis in the event of a rising withdrawal rate. Nexo however treads ahead under persistent bearish risks due to the crypto market’s dire state and the high interests.
The NEXO/USD pair eyes $0.58 and $0.69 levels with the interim support being from historical significance.
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