DeFi contagion fears and rumors of Celsius and 3AC insolvency could weigh on NEXO price

The value of Nexo (NEXO) continued to fall on June 15 as crypto lending companies proceed to be shaken by the falling cryptocurrency market.

In the meantime, Nexo has denied rumors of publicity to Three Arrows Capital (3AC), a Dubai-based crypto fund going through insolvency dangers.

NEXO value suffers on DeFi contagion fears 

NEXO, which serves as a safety token at a cryptocurrency lending platform of the identical title, fell almost 25% to $0.61 a unit, its lowest value studying since January 2021.

The huge intraday decline got here as part of a broader draw back transfer this week, which stretched NEXO’s losses to 40%.

An ongoing contagion in the crypto lending sector contributed to NEXO’s underperformance.

Merchants worry that the majority decentralized finance (DeFi)/centralized finance (CeFi) companies, which provide excessive yields to purchasers on their cryptocurrency deposits, will default on their debts because of the wipeout of almost $1.5 trillion from the crypto market in 2022. 

The considerations proceed to mount after the collapse of Terra (LUNA) — now referred to as Luna Basic (LUNC) — a $40 billion algorithmic stablecoin venture, in Could.

A month later, Celsius Community, which presents purchasers as much as 18% yields, paused withdrawals due to “extreme market conditions.” Its purchasers have pulled virtually half of their belongings out of the platform since October 2021, thus leaving it about $12 billion as of Could 17 to satisfy debt obligations.

I’m undoubtedly rooting for Celsius to not get liquidated. That’s buyer cash. And fuck the funds who’re looking this cease loss. I hope they get rekt. #bitcoin

— Lark Davis (@TheCryptoLark) June 14, 2022

In the meantime, 3AC, a crypto hedge fund, has witnessed liquidations of at least $400 million. As well as, on-chain information reveals that the agency can also have a minimal debt of $183 million in opposition to a collateral place of $235 million (derived in Staked Ether).

The handle makes use of USDT/USDC to repay the debt and withdraws ETH, after which converts ETH to USDT/USDC by way of “sinofate.eth” and repays it, and so forth. In virtually 24 hours, the handle has bought about 50kETH. https://t.co/TUzqXBXBwF

— Wu Blockchain (@WuBlockchain) June 15, 2022

The fund may switch the financial dangers to its lenders if it turns into bancrupt.

“The lenders will bear the PnL [profit and loss] distinction between how a lot they’re owed versus what they get in liquidating their collateral,” noted Degentrading, a market commentator recognized for highlighting the Celsius Community’s liquidation points.

He added:

“Meaning defaults will trigger SIGNIFICANT EQUITY erosion […] Not all lenders are made equal. Celsius is the worst. It has gone beneath. Nexo, I do not know. BlockFi is fairly unhealthy as nicely.”

Nevertheless, Nexo says it at present has no publicity to 3AC regardless of partnering with the fund over a nonfungible token (NFT) lending product in December 2021. The agency asserts that the partnership with 3AC didn’t take off.

All Nexo has ever accomplished with Three Arrows Capital is signal a partnership with their NFT fund, but it surely didn’t take off and we at present have $0 enterprise and publicity with them.

— Nexo (@Nexo) June 15, 2022

What’s subsequent for the NEXO token?

Nexo has 100% liquidity to satisfy its $4.96 billion worth of debt obligations, in response to U.S.-based audit agency Armanino. That raises the agency’s potential to keep away from a liquidity disaster within the occasion of a rising withdrawal fee, not like Celsius.

Nonetheless, NEXO value treads forward beneath persistent bearish dangers, primarily because of the crypto market’s dire state in a high-interest fee atmosphere. The NEXO/USD pair now eyes the $0.58–$0.69 vary as its interim assist attributable to its historic significance from December 2020 to January 2021.

A rebound from the $0.58–$0.69 vary may have NEXO bulls eye $0.883 as their interim upside goal. This degree was instrumental as assist through the early-Could value crash; it now coincides with the 0.786 Fibonacci retracement graph drawn from the $0.11-swing low to the $3.71-swing excessive.

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Conversely, a decline under the $0.58-$0.69 vary may have NEXO watch December 2020’s assist degree close to $0.43, down round 35% from June 15’s value.

The views and opinions expressed listed below are solely these of the creator and don’t essentially replicate the views of Cointelegraph.com. Each funding and buying and selling transfer entails threat, you need to conduct your individual analysis when making a call.