- Nexo has been recently full of red flags according to a Reddit user.
- 85% of Nexo’s total assets held on Ethereum are Nexo tokens.
- BlockFi is an example of a lending platform that succumbed.
Amid reports that Nexo, a giant lending platform, is paying 10% on stablecoins, concerns have been raised. Notably DeFi yields are only 1% in the broader market while short-duration US treasuries are only 4.5%.
With this said, If the yield is greater than the “risk-free” market rate, they are by definition taking the directional risk to chasing said “yield“.
It is important to note that Nexo makes interest via collateralized borrowing to users, which is a higher rate than the yield provided, According to a Reddit user. The problem, however, arises when the system has no lender of last resort. This could lead the commercial bank model on crypto rails to blow up quickly. “Liquidity issues”, and every customer has lost their money.
Additionally, Nexo also controls over 82% of the total supply of its tokens.
However, 85% of Nexo’s total assets held on Ethereum are Nexo tokens. This means that the platform’s backing could become compromised if liquidity issues mount.
According to other sources, a family of fintech business owners is suing Nexo in London. According to the family, Nexo restricted their ability to access up to £107 million ($126 million) in assets. They then used threats to coerce them into selling everything to the cryptocurrency lender at a 60% loss.
NEXO tokens worth millions were owned by brothers Jason and Owen, cousin Shane Morton, and tens of millions of dollars in Bitcoin and other cryptocurrencies, according to a report by City AM.
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