In a very competitive space, it has become critical for any blockchain company to set itself apart. It’s not enough to make a few improvements to the service you provide, but to also create something unique. This is exactly what Nexo have attempted to do, and by the looks of it, have succeeded in doing so. Instead of being just another coin among an already saturated market (2,090 coins according to CoinMarketCap), Nexo have created an opportunity for people to borrow against the coins they already own, rather than selling it for fiat. As they title themselves, this coin is the world’s first crypto-backed loans provider. By now, you should be very interested in how this works, so why not introduce you to this coin.
All you need to know about Nexo
Although this coin itself is fairly new, the company behind it has quite a reputation. Behind this coin is the company Credissimo based in Bulgaria, which has been around for over 10 years since it was founded in 2007. From the company’s webpage, their vision was to ease the process through which people received loans. They provide easier access to loans online instead of keeping people waiting for approval and credit checks. The team behind the company is also impressive with members having a background in both banking and crypto spaces. Suffice it to say, the team itself is a trusted one. (Check out: The Most Prominent Cryptocurrency Hacks and Scams You Should Know)
Since the company was formed in 2007, Credissimo has made several leaps in growth including a listing on the stock exchange in 2014 through an IPO. However, you should know that the company was delisted from the exchange at the start of this year in January, 2018. Presently, Credissimo provides their loan services to 5 countries including Bulgaria, Poland, Malta, Spain and Colombia. Furthermore, they have the necessary approval from regulators. Due to the growth of the company, they were awarded by Forbes two awards including one for financial Sector Innovations and the company reached top 10 in the Alternative Finance in European FinTech Awards 2017.
Their whole service is based on algorithms that determines the amount of loan you would receive. A quick instant loan can be up to €300, but you can keep increasing your loan limit with time. So far, the company has issued €117 million in loans since the company was formed and has gained a return of €151 million. That is not a bad figure considering that the numbers have been confirmed and audited by Deloitte. But Credissimo were not satisfied with their returns or market share, and they wanted to reach even more people, which is where Nexo came to be. Unlike conventional loans, crypto loans could be borderless and thus more accessible; add to that they would also be secure. That is why they launched an IPO for Nexo in the first quarter of the year. (Do you know: What Is The Future Of Cryptocurrency In Finance?)
The ICO ran from March to April 2018 and managed to raise $52.5 million that was their initial fundraising goal, leading to the start of Nexo. During the ICO, one Nexo token was going for $0.1, yet each is now valued at $0.16. Not a huge growth per se, but the idea behind Nexo was not to sell the coin itself but the service they provided. Although you may still be interested to know that the ICO was quite successful and the coin spiked at a value of around $0.53 shortly after completion before being bogged down by the crypto market’s downturn. No public sale of the Nexo tokens was carried out because, during the private pre-sale, the company received an overwhelming number of requests from institutional investors. In fact, Nexo reported that even in this private pre-sale, the tokens were oversubscribed by 5x, but they still kept their cap at $52.5 million. As such, all the tokens were taken up by these investors. As a consolation, participants who were whitelisted for the public pre-sale would still receive 100 tokens in their wallets. All the same, Nexo today has a market cap of over $90 million, but again, the coin isn’t the main focus of the company.
That is all the background you need about Nexo, and now comes the good stuff…
How does Nexo operate?
As we already mentioned, Credissimo is a company that provides access to loans; Nexo just includes crypto as a kind of collateral. Simply put – you deposit your crypto into the Nexo wallet and get a loan based on your deposit. There is no need for a credit check or collateral since your crypto acts as such. (Investing In Cryptocurrencies: Watch These 5 Profitable Cryptocurrencies)
So how do you go about it? Simple. You only need to create and verify your account by confirming the link sent to your email. This process is just for the basic verification of an account, and it gives you the opportunity to borrow up to $10,000 in loans. For most of us, this would be good enough, but Nexo provides loans of up to $2 million. For this, you would need advanced verification, not by uploading documents but just using your picture that you can take from your phone and upload it. This could take only a few minutes, so it shouldn’t be a hurdle. (Before investing: Learn How Cryptocurrency Scams Operate And Avoid Them)
By creating an account, you also automatically create a wallet with Nexo, where you are going to deposit your coins. This is the next step to getting your loan. So far, Nexo accepts deposits in 21 different coins including Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Ripple, Stellar, etc. Suffice it to say that they allow a majority of the most popular coins available in the market. If you have any of the coins accepted by Nexo, then you simply make a deposit into that Nexo wallet and wait for confirmation. The time it takes for your coins to be reflected onto the Nexo wallet will depend on the coin you use. Bitcoin usually requires 6 confirmations, about 10 minutes or so, while coins like Ethereum and other ERC20 coins require 50 confirmations. Some coins are faster like Litecoin, and you can have the coins in your wallet after only a short time. (We were wondering: Will Cryptocurrencies Recover From Their Price Slump In 2018?)
As soon as your coins have been verified and show on your Nexo wallet, your loan should be available immediately. The amount of loan available to you will be determined by algorithms that take into account the market value of your coins as well as the historical volatility of the coins you hold in your wallet. Typically, though, the loan-to-value (LTV) ratio is around 20% to 50% of the value of coins held. As an example, take a gander at the image below that shows sample loan amounts. After that is done and you have selected the amount of loan you want, your loan can be withdrawn immediately to your bank account after the bank account details are made available. Withdrawals can be made in either US dollars or euro, and the time it takes depends on your bank. Nexo also intend to provide a Nexo credit card soon that would be used to make instant withdrawals at any ATM or to pay for bills from any POS terminal.
Of course, this whole service isn’t free since there is an interest charged for repayment of the loan at an annual rate of 16%. The loan maturity period is up to a year from the date you borrowed, and that should be enough time to repay the loan. To pay back, you could do so using fiat money by wire transfer or using crypto, including that which you have in your Nexo wallet. Oh, and don’t forget that the APR drops to 8% if you repay your loan using Nexo tokens rather than any of the other allowed methods. That was an additional method meant to incentivize people to buy Nexo tokens on the open market. (Ask yourself: What Would Happen To Bitcoin Price When It Is All Mined?)
Now let’s look at an example of a loan you could get and how the repayment would work. Assume you need a loan of $10,000 and you had Bitcoins to use as collateral, then you would need about $20,000 worth of Bitcoin – that’s about 3.125 Bitcoin at the current market value. Your $10,000 would then be wired to your bank account, and then the 1-year clock starts ticking. You can pay your loan at any time during the year as a lump sum or in instalments; whatever you prefer. Given the 16% interest, you would have to pay back $11,600 in total, but only $10,800 if you do so using Nexo tokens. (Which Are The Most Influential Cryptocurrency Markets By Country?)
That’s not a bad deal now, is it?
How safe is it to use?
Alright, you probably have some more questions, chief among them security of your money and crypto assets. You might want to look back at the company itself first – Credissimo. All through the time it has been around, Credissimo has received high praise for its service, so right off the bat you know it’s a legitimate and trusted company. What about your coins? You will be glad to hear that Nexo does not keep any of your coins themselves as that would be very insecure. Hackers are always targeting crypto companies to steal their crypto, and in many cases they have succeeded, so Nexo naturally chose to find a 3rd party custodian – BitGo. In case you haven’t heard of BitGo, it is a blockchain security company based in Palo Alto, California and also has offices in New York, Singapore, Tokyo and London. They are such a reputable group in the security of crypto that major companies like Kraken, UPbit, CME Group, etc. use them to store their coins. It is BitGo that also provides the Nexo wallet as well, where all client coins are kept.
So as far as the security of your coins, you can sleep well knowing that this is covered. As for your personal details, these too are handled by Onfido, another leading company in user identity verification used by the likes of Coinbase, Bittrex, HSBC, etc. Thus here too your personal data is secure. It was important for Nexo to partner with a recognized brand as Onfido in order to comply with regulations around the world.
Thanks to the above measures, Nexo is now available in over 40 fiat currencies and in more than 200 jurisdictions. Obviously, there were a lot of people interested in using their services following the completion of their ICO. Remember it was during the downturn of the crypto markets, so a lot of people were keen to get some money without losing their coins if they gained value. That is why so far Nexo has received loan requests of over $1 billion since they launched. (Does BTC Stand A Chance To Becoming The Worldwide currency?)
It is unclear how much they have already given, and I personally haven’t tried to use their service, but I trust it won’t be too difficult to get a small loan. Just to fulfil these loan requests, Nexo will need a huge finance provider, and they are looking to work with a US bank that is FDIC insured. If this is accomplished in the near future, then Nexo would be in a position to issue a lot more loans, and in larger amounts to their clients given that they now probably hold a lot of assets in crypto.
Why go through all this?
Now to the big question, is this worthwhile and should you go through the process. Absolutely yes. Just consider the alternative to see how cumbersome it would be. Suppose you have about 10 Bitcoins and would very much love to convert them to fiat so that you can take care of some issues that need money. One option is to pay for whatever it is using Bitcoin directly, but then there is a lot you can’t do with crypto – you can’t buy a car, pay your rent or start a business using crypto. So the next alternative is to liquidate your coins for fiat through an exchange. Today, the process isn’t difficult because all you need to do is sell your coins at the current market price by sending the coins from your wallet to the exchange. In most cases, the exchange itself provides the wallet, so there isn’t even the need to wait for confirmation. Just like that and your money is on the way to your bank account.
But then there is a chance that the crypto you held grew in value, perhaps even on the day that you just sold them – it happens. In that case, you would have lost a very good investment and will probably be kicking yourself. This is where Nexo comes in because it allows you to have your cake and eat it too. Your coins are still there, only in the Nexo wallet and not yours, but you can have them back at any time once you have completed payment, and then you also get money in fiat sent to your bank. So if you have second thoughts because you see Bitcoin gaining value a week later, just pay back your loan and the coins are yours. That is the beauty of Nexo! (Do you know all the: 5 Tips to Choosing the Ideal Cryptocurrency Exchange?)
Something else you may be wondering- interest rates. Nexo charges a 16% interest rate if you pay back using fiat, and that may be a bit of a sticking point for some. According to the Federal Reserve, the average APR for a credit card is about 13.8%, and that makes the Nexo APR a bit higher than average. But the APR on a credit card could be higher depending on a person’s credit rating and a myriad other factors. And even if we concede that the interest rate is a bit higher than average, consider the efficiency and speed of the service offered by Nexo; there literally isn’t any other company offering a loan backed by crypto out there. Besides, if you only had assets in crypto, no bank would give you a loan with that as collateral. Therefore, we can safely say that the service provided here is very unique. Plus, interest rate drops to 8% when paying back using Nexo tokens, which is far less than any credit card loan.
By the way, there is an added incentive to holding Nexo tokens – dividends. Just like companies give annual dividends to shareholders, Nexo is going to give dividends to those holding their tokens as a way of appreciation. Furthermore, you won’t have to wait an entire year to earn some of these dividends. According to the company, they intend to offer the dividends more frequently through the year, although the exact number of times has not been stated. 30% of the company’s net profits are given to Nexo holders as long as they are eligible. To be eligible, you must be verified using the Know Your Customer (KYC) system handled by Onfido. Remember that advanced verification is the one that requires your photo, so just provide that. Then you must own the Nexo tokens 10 days prior to the issue date of the dividend distribution date. Just to make it easier, this date will be announced a head of time so people have time to acquire the tokens. On the due date, dividends are distributed either in Nexo, ether or another US dollar stable coin like tether. (How Did Tether Cryptocurrency Survive The Crypto Market Selloff?)
What about Nexo as a tool for investment?
So far, we have discussed a lot about Nexo and its features, but there may be some who are simply interested in the coin itself as an investment to add to their portfolio. To decide whether Nexo is a good investment, we have to look at the fundamentals of the company. As already discussed, there is a whole lot going on with Nexo the company and that means there is still a lot of room for growth. So far, Nexo has reached more than 200 jurisdictions, but it can take up more clients as soon as they get a huge financial provider like a major bank.
Considering that Nexo has only been live for a little over 5 months, there will definitely be a lot more people seeking their services in the years to come, and that means the company will definitely grow. We have already looked at Nexo dividends and how Nexo holders receive a share of the company’s profits. So why not invest in Nexo tokens to get this advantage too. It is not clear how much profit the company will make, of course, but then there isn’t any other coin out there that offers dividends. Therefore, investing in Nexo is a double advantage because you gain when the coin goes up and earn an additional dividend several times a year. (Make use of your coins through the: 5 Most Popular Uses of BTC and other Coins)
Then consider the utility Nexo provides as a backup to a person’s coins. The main reason why the company has received so many loan requests is because people are still worried about cryptocurrencies and some are sceptical whether they will ever rise back to their former glory. In panic, these investors have preferred to keep their coins with Nexo knowing that they can have both coins and fiat simultaneously. The road ahead toward the end of 2018 isn’t any brighter, and we expect that coins will continue to decline in value at least over the short term. This would be very good news for Nexo and an excellent investment opportunity because the coin itself will rise in value even as other coins continue to drop. Moreover, people would most likely prefer to convert their coins to Nexo rather than fiat or alternative coins because only Nexo provides dividends and low interest loans. As a result of this, we see this coin rising in value for the remainder of 2018.
The chart above shows the value of Nexo during the time it has been in existence on CoinMarketCap. There is nothing shocking about this graph because it is typical of any other coin in the market. The value of Nexo did not go down because the coin has been diminishing in value inherently, but only as part of the larger downturn in the crypto markets. All coins today are trending at values significantly lower than they had at the start of the year. Nexo is no different because there is a general apprehension towards crypto at the moment, but there are high chances this will change in the future. (Consider some: Ethereum Price Prediction Update And Forecast For Autumn 2018)
We have looked at many coins in the market, and they are all suffering because of a market correction. All through 2017, coins underwent a huge spike in value that just had to be followed by a correction, which is what we are seeing now. Nevertheless, no one has completely lost faith in crypto, and in fact, institutional investors are only now getting into the fray. As we all know, they are the ones who carry the big bucks, and their influence would be enough to make the entire market start to go up again. All eyes are currently on the much awaited Bitcoin ETF decision to be announced today by the SEC. If the regulator approves of the ETF, then it would be the first step toward a bullish crypto market, with Nexo hot at the heels.
Already the technical analysis of the coin’s price charts shows potential as value has been increasing over the past 2 months. That is unlike many other coins, and the reason is simply because people are dumping their coins in favour of stable coins like tether that would never go below $1 in value per coin. Nexo has presented yet another alternative to investors, which explains its recent rise in value. If this continues to happen, and we expect it will, then Nexo will continue to go up for the rest of the year. Once 2019 rolls in, Nexo will continue to go up because of the expected bullish market that will drive all coins upwards. (Some of the: Bitcoin Price Prediction Update And Forecast For Autumn 2018)
All in all, I see no downside in holding Nexo tokens in 2019 because they offer a double purpose as discussed. The coin itself will most likely appreciate in value in the coming year while also earning monthly dividends. It is a very interesting coin indeed, and one that could also be quite profitable to any investor.
For anyone who is curious about how they can get a loan from Nexo, just watch this short clip: