NEXO cost drops 40% in 72 hours on rumors of ties to ‘insolvent’ crypto fund

The cost of Nexo (NEXO) ongoing to fall on June 15, as Nexo denied rumors of contact with Three Arrows Capital (3AC), a Dubai-based crypto fund facing insolvency risks.

NEXO cost suffers on DeFi contagion fears 

NEXO, which works as a security token in a cryptocurrency lending platform of the identical name, fell nearly 25% to $.61 one, its cheapest cost studying since The month of january 2021.

The huge intraday decline came as part of a wider downside move now, which extended NEXO’s losses to 40%.

NEXO/USDT weekly cost chart. Source: TradingView

An ongoing contagion within the crypto lending sector led to NEXO’s underperformance.

Traders fear that many DeFi/CeFi firms, that offer high yields to clients on their own cryptocurrency deposits, will default on their own financial obligations because of the wipeout of nearly $1.5 trillion in the crypto market in 2022. 

The concerns still mount after the collapse of Terra, a $40 billion algorithmic stablecoin project, in May.

Per month later, Celsius Network, that provides clients as much as 18% yields, stopped withdrawals because of “extreme market conditions.” Its clients have pulled nearly half of the assets from the platform since October 2021, thus departing it about $12 billion by May 17 to satisfy debt obligations.

Meanwhile, 3AC, a crypto hedge fund, has observed liquidations with a minimum of $400 million. Additionally, on-chain data reveals the firm may in addition have a minimum debt of $183 million against a collateral position of $235 million (derived in Staked Ether).

The fund could transfer the economical risks to the lenders whether it becomes insolvent.

“Lenders will bear the PnL [profit and loss] distinction between just how much they’re owed versus the things they enter liquidating their collateral,” noted Degentrading, an industry commentator noted for highlighting the Celsius Network’s liquidation issues.

He added:

“Which means defaults may cause SIGNIFICANT EQUITY erosion […] Not all lenders are created equal. Celsius may be the worst. It’s gone under. Nexo, I’m not sure. BlockFi is fairly bad too.”

However, Nexo states it presently doesn’t have contact with 3AC despite partnering using the fund more than a nonfungible token (NFT) lending product in December 2021. The firm asserts the partnership with 3AC didn’t remove.

What’s next for that NEXO token?

Nexo has 100% liquidity to satisfy its $4.96 billion price of debt obligations, based on U.S.-based audit firm Armanino. That enhances the firm’s possibility to avoid a liquidity crisis in case of an increasing withdrawal rate, unlike Celsius.

Nevertheless, NEXO cost treads ahead under persistent bearish risks, mainly because of the crypto market’s dire condition inside a high rate of interest atmosphere. The NEXO/USD pair now eyes the $.58-$.69 range since it’s interim support because of its historic significance from December 2020-The month of january 2021.

NEXO/USD weekly cost chart. Source: TradingView

A rebound in the $.58-.69 range might have NEXO bulls eye $.883 his or her interim upside target. This level was instrumental as support noisy .-May cost crash it now coincides using the .786 Fibonacci retracement graph attracted in the $.11-swing low towards the $3.71-swing high.

Related: May be the bottom in? Raoul Pal, Scaramucci stock up, Novogratz and Hayes weigh in

On the other hand, a decline below the $.58-$.69 range might have NEXO watch December 2020’s support level near $.43, lower around 35% from today’s cost.

The views and opinions expressed listed here are exclusively individuals from the author and don’t always reflect the views of Cointelegraph.com. Every investment and buying and selling move involves risk, you need to conduct your personal research when making the decision.

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